How Consumer Protection Act Affects Lease of Property — Part 2

Cpa and Lease Agreements
How the CPA effects new Lease Agreements. — Photo: jimtim0505 on Flickr

South Africa’s new Consumer Protection Act comes into effect on 1 April 2011. Part 1 covered the introduction of a “Cooling-off” period and the use of “Voetstoots” clause under the new CPA legislation.

Part 2 deals with some important changes to the law governing Lease Agreements, when the new CPA comes into effect on 1st April.

Now some of my more astute readers will have noticed that this is also April Fools Day. Please people, this is purely co-incidental, however inopportune the date may seem.

Lease Agreements: The CPA introduces some far-reaching changes to Lease Agreements for immovable property. Specifically for ordinary people, the changes affect the maximum duration and grants the parties certain rights of cancellation.

Note that Leases to “Juristic Persons” fall outside the ambit of the CPA. “Juristic Persons” includes Closed Corporations, Companies, Trusts, Partnerships and Associations. No distinction is made between Commercial and Residential property.

Duration of Lease: The maximum duration of a Lease Agreement is 24 months.

Right of Cancellation: The Lessee (consumer) may terminate the Lease at any time after giving 20 (business) days notice, effectively one month. The Lessor must give 20 (business) days notice to cancel for a ‘material failure to comply with the agreement’ and must give 40-80 days notice that the agreement is coming to end.

After expiry, the lease continues on a month to month basis unless the Lessee agrees to a further fixed term.

From the above it can be concluded that the new Consumer Protection Act will bring some much-needed protection for consumers to the market place. Most think that it is also likely to result in Leases being contracted more readily with “Juristic Persons” and not the ordinary consumer. So a spike in Letting to “Juristic Persons” seems likely.

Similarly with the Selling of Property, Transfer Duty from the sale of property to “Juristic Persons” has recently been adjusted downwards to be on par with the Transfer Duty payable by an ordinary consumer. So the trend may be toward a greater number of sales to “Juristic Persons,” than would otherwise have been the case.

The Rental Housing Tribunal already administers a similar (to the CPA) scheme under the Rental Housing Act. It remains to be seen if this body will, in terms of Section 5(3) of the CPA, apply for an ‘industry-wide exemption’ to provisions of the CPA that overlap the Tribunal’s functions.

If there is anything you would like to add, please feel free to do so in the comments.

Source: Bisset Boehmke McBlain
Photo Credit: jimtim0505 on Flickr

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1,980 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Hello John,

    I do hope you can shed some light on my predicament.

    Two years back my husband and I signed a lease for a shop. One year into the lease we sold the business. We notified various key people within the agency. They asked us for supporting documentation in order to transfer the lease from our name to the new owners. This was done via email as well as hand delivered.

    A few months later we were told that they heard that we wanted to sublet and we were in breach. I reminded them of the previous conversations and documents that we submitted to them as per their request. It seems that they misplaced the documentation and never actually transferred the shop onto the new owner’s names and failed to notify us that it was still on our names. Imagine if that shop had burnt down!

    They also allowed the new owners to sublet after they quoted breach to me. Yesterday, I decided to double check that the lease was indeed taken off our name only to receive a mail this morning from the agency say the following:

    The lease expiry date was 31 May 2015.
    We are however struggling to get the FICA documentation from (name removed – current tenant) and there is also an amount of R3995.12 that he refuse to pay and before that is paid we can’t do the lease in his name even if we receive all his FICA documentation. This was due to a leaking toilet for which the tenant is responsible and as the lease was still in your name, you should actually be liable to pay the amount.

    You will have to stipulate what we should do with the deposit, whether we must pay the amount to you after deducting the R3995.12 or must we transfer it to (name removed – current tenant) account after deducting the said amount.

    Will you be able to assist with getting the documentation from (name removed – current tenant)?

    —End of mail—

    Do I need to get a lawyer involved?

    1. Hi Asia,

      “Do I need to get a lawyer involved?”

      Yes, as soon as possible. If you do nothing, you risk having legal action taken against you and it could get messy. An attorney is your best bet to help limit scope of the damage. You may get lucky.

  2. Have signed a lease agreement with my tenant for 6mths with a 2mth notice period for both the parties (Lessor & Lessee) The property is on the market to be sold.

    Have been told that my tenant can give me 20 working days notice regardless of the lease. Is this true?

    1. Hi Moira,

      Your tenant may give you 20 working days (one month) notice at any time, provided that you are classed as a ‘supplier’ under the CPA. A ‘supplier’ is a landlord that leases property in the normal course of business.

      The CPA does not apply to your contract if you only let the occasional property and this does not form part of a business activity. In that case your tenant may not cancel early; two months notice will apply.

  3. Hi John

    I have been renting a commercial property since February 2012. My landlord gave me verbal permission to sublet. I gave my sublet tenant a contract and he filled in the date for 3 years. I would like to find out if the contract is legal as his contract expires march 2016 and my contract with my landlord expires February 2016?

    Do I have the right to request that we setup and sign a new contract (with the sublet tenant) because of this reason? And also because of the CPA that states that a lease agreement may not exceed 24months unless it benefits the tenant to do so.

    It does not as there is a yearly rent increase of between 8-12%. It also does not benefit me as I would like to expand my business and will be needing the space that I am subletting at the moment.

    1. Hi Carika,

      Regarding the validity of your sub-letting lease agreement: even if you don’t sign a new fixed period lease, on expiry it would automatically revert to a month-to-month basis and this would then suffice to keep you covered for the last month of your sub-lease period. However, as you intend to renew your lease on 1 March 2016, this should not be an issue for you anyway.

      It may be best to avoid a renegotiation of your sub-lease terms, if you can. Your tenant is under no obligation to entertain this and it might just open up a can of worms that you would not otherwise have had to deal with.

      Unless you are letting out property in the normal course of business, which I’m sure is not the case, you are not classified as a ‘supplier’ in terms of the CPA. This means that the CPA does not apply to your sub-lease contract, in which case you are not limited to 24 months and the period may be any term agreed upon by the parties.

      Hope that helps, and thanks for the questions.

  4. When a lease expires and the tenant wishes to make changes to the new lease prior to signing whereas the landlord is not in agreement with such changes, does this mean that he can give the tenant notice.

    1. Hi TJ,

      On expiry, a fixed-term lease reverts to a month-to-month basis on the same terms and conditions as the original lease. Either party is entitled to give the other notice. This arrangement would continue until either a new fixed term contract is negotiated between the parties, or notice is given by either party.

      So yes, if agreement on new lease terms can’t be reached, the landlord can give you a month’s notice.

  5. Hello John

    I have signed a fixed term lease agreement that only expires at the end of the year (via an estate agent, but the contract specifies the personal details of the landlord, therefore I am assuming the contract is between two natural persons, even though we worked via an estate agency).

    I have bought a property and would like to move, and therefore terminate my rental agreement. I have a good relationship with my landlord and she has verbally agreed to release me from my rental contract if we can find a new tenant (we agreed that I will continue paying the monthly rental until a new tenant is found, and cover any cost incurred to find a new tenant).

    Under the “Termination” Clause of the rental contract set up by the estate agent, it only states the following: “The Tenant shall not be entitled to terminate the Agreement before the Termination date.” Subsequently, the estate agency is refusing to release me from my contract, stating breach. I have brought up the CPA with the agency, but they have just stated that they follow the Rental Act and not the CPA. They also do not acknowledge that the landlord has given permission for us to terminate the contract early.

    Please advise if there is something I can do to be released/terminate this contract.

    Your feedback will be appreciated
    Corli

    1. Hi Corli,

      Under the CPA a landlord is a ‘supplier’ if the property is leased out in the normal course of business, whether through an agent or not. The CPA does not apply to your contract if your landlord is not a ‘supplier’, in other words only leases the occasional property. In your case it sounds like the latter. The fact that the agent has stated that the Rental Act is applicable, rather than the CPA, would seem to bear this out.

      Where the CPA does not apply, you’re bound by the terms of your agreement; you may be held liable for the balance of the lease period. However, if another tenant can be found, there’s no reason why you should not be released, never mind what the agent has to say about it.

      It may be prudent to confirm the details of your verbal agreement with the landlord by email and copy the agent. Also, bear in mind that, while your are bound by your agreement, neither the agent nor the landlord have any pressing incentive or motivation to do the work required to find another tenant. You will probably have to do this yourself.

      Good luck.

  6. I have a situation where my landlord never renovated the apartment since I moved in. My child was born just a month after moving in and the carpet was never cleaned as promised. The landlord owed the municipality over R14 000 for the electricity bill which was still under the previous tenant.

    I spoke to the landlord about my dissatisfaction, but he never attended to any of my issues. I then moved out without giving notice as my child was getting more sick due to dirty carpets.

    The landlord took my deposit. He wants me to pay for another month, but he is the one who was at fault. He handed me over to his lawyers. Please advise.

    1. Hi Tebo,

      The answer depends on whether your lease agreement falls under the protection of the CPA, or not.

      Your landlord is a supplier if he lets out this property in the normal course of business. In that case, your contract falls under the CPA and you are entitled to give a month’s notice at any time. A landlord in this situation would be entitled to levy a cancellation penalty. This is usually an amount equal to a month’s rental. However, it may be more if it’s reasonable — for example, if you were to move out without giving notice, as you have done.

      Conversely, where a landlord only lets out the occasional property, and this does not form part of a business activity, then the landlord is not a supplier and consequently your lease agreement would not fall under the protection of the CPA. Here you will be bound by the terms of your contract; you may be held liable for the balance of the lease period, or for at least until a replacement tenant can be found.

      Unfortunately, unless the cleaning of the carpets was written in as a condition of the lease agreement, it will be difficult to prove that the landlord agreed to clean the carpets. In other words, it will be your word against his.

      In either case, it seems that you are going to lose your deposit and more. You would be well advised to make arrangements with the lawyers as quickly as possible to avoid unnecessary legal fees. You should do everything you can to avoid having a judgement taken against you as this may have an impact on your credit record. If this happens, you could have difficulty in finding a place to rent later down the line.

      Best of luck, and I do hope your child gets well soon.

  7. I have signed a lease for 12 months, started 1st October 2014. I had to give notice in this month amounting to 80 days notice. The owner of the property informed me that they do not accept the notice given beacasue as per the lease I have to stay untill end of lease agreement. Is there something I can do? I’m sure they’re not going to give my month and a half deposit back.

    1. Hi Yolanda,

      There’s probably not much you can do about it, unfortunately.

      Where your lease falls within the ambit of the CPA, you may cancel early. However, the landlord would be entitled to levy a cancellation penalty. This is usually equal to a month’s rental (read deposit) but it can be more if it’s deemed to be ‘reasonable’.

      It is of course possible that your contract does not fall under the CPA, by virtue of the fact that your landlord is not a ‘supplier’. In that case you may be held liable for the balance of the lease period, irrespective of how much notice you give. It’s still breach of contract.

      In either case it’s pretty certain that you will lose your deposit.

      If you can find a replacement tenant, someone who can take over from you, and the landlord is not out of pocket, then you might get your deposit back.

      Best of luck.

  8. Hi,

    I have signed a lease contract for 12 months about 2 weeks ago for the period starting 01 May 2015. The owner did not sign the contract or install the water and electricity meter until yesterday, according to the estate agent. I paid the deposit and rent for 1 month and before I even moved in.

    I found a bigger apartment and decided to cancel my contract with the estate agent and rather move in to the bigger apartment. The estate agent is telling me that I am committing breach of contract and therefore I will not get a cent of my money back. Is this true?

    1. Hi Elsa,

      “Is this true?”

      Yes it is.

      A binding contract has been signed and money has changed hands. Basically, you’re at the mercy of the agent if you cancel now.

      Considering there’s little time to find a new tenant for the month of May, the landlord will miss out on at least a month’s rental. If the apartment is a bit on the small side, as you have found, it could take longer than a month to re-let.

      Fortunately for the landlord, your deposit and one month’s rental is on hand. If a tenant is found for the month of May, you could conceivably have your deposit refunded, or part thereof if ‘costs’ are deducted. This is not as unlikely as it sounds; there may well be a tenant waiting in the wings. Let’s hope so.

      You might know of someone that could take the apartment for the month of May? Can’t think of anything else that might help, sorry.

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