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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2,053 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Good Day,

    I need help.

    I have been renting a house for 2 years and 5 months. I live with my mother and 2 nephews. I have had a verbal agreement with the landlord that we can live there until we decide to leave or buy our own house. The landlord then decided to sell the house and maintained that we should relax as he is looking at other options and might not sell.

    Last week the new owner came to visit us to enquire if we have received a notice as she has bought the house and should be moving in by month end. We do not know what to do as we were not given notice and had no confirmation that the house has now been sold and we are struggling to find an alternative place to live.

    What are our rights with regards to this? We have paid a 1 months deposit and we have always maintained the house ourselves???

    1. Hi Mpho

      When a rented house is sold, according to the legal precept known as “huur gaat voor koop”, which is inherited from Roman Dutch law, the new owner must honour the terms of any existing lease agreement.

      As you don’t have a written lease agreement, you are renting on a month-to-month basis. Therefore a calendar month’s notice of termination is required. In practical terms, seeing that the new owner gave you notice a week ago, your one month notice period starts at the end of this month.

      It would be a good idea to check with the previous owner regarding your deposit refund. If you are told that the new owner will be refunding you, it would be best to confirm this in writing with both new and previous owners. Perhaps an option that you might propose is that you withhold next month’s rent in lieu of your deposit.

      Good luck.

  2. Good day

    I bought a house with a flat in the yard. I stay in the house and rent out the flat.

    At end January 2016 I made a verbal agreement with new tenants. We agreed upon rental amount, water and electricity. Agreed that if they cannot afford it they won’t move in, and 1st month of half or no payment will be considered as 30 days’ notice.

    They looked at the flat and were told what needs to be fixed and that it will be done when the money is there. They were given 2 days to decide if they want to move in or not, accepting the agreed payment and flat as is. No pressure as others were also interested in the flat. No lease was drawn up, no deposit was asked; rent on a month to month basis.

    Beginning in February, they said they’ll take the flat and paid the 1st month’s rent. Not in full! Paid the rest 2 weeks later. On 1 March 2016 I gave them a letter stating that they must give 30 days’ notice if they can’t afford the flat, and if they cannot pay rent by 2nd of each month I would give them 30 days’ notice. They informed me verbally that there is no problem.

    I gave them a notice letter (30 days) at beginning of April. Their response: we will stay for 3 months.

    Now, on 13 May 2016, I have received half the rent for April. They have not paid a cent for electricity, and have given less than half of the water’s amount from start of February. We share the water and electricity as there is only 1 electricity box and 1 water meter. I can switch of the electricity as the switch is in my house at the switch board (but did not). I can’t do anything to the water.

    End of March, I had to sell most of my belongings just to provide food on the table. Even had to get a food voucher from welfare. Things I said I would never do!

    They now owe me almost R7000. What can I do?

    Thanking you for your assistance.

    1. Hi Madeleine

      Without wishing to sound negative, there’s little advice I can offer you in this situation. At this point, you have illegal tenants that are refusing to move and you do not have the financial means to obtain an eviction order.

      You can’t switch off the electricity or water and you may not interfere with the tenants right to access the property, even if they are not paying the rent. The only way you can get rid of illegal tenants is to go the legal route and let the Sherriff of the Court physically remove them. Unfortunately, this can be an expensive and time-consuming exercise.

      When renting out a property, there are a few fundamental precausions you can take to avoid the type of situation you find yourself in. At the very least, you should do these five things:

      1. Ask for personal and professional references. This will help you assess a potential tenant’s personality and employment status;
      2. Ask for bank statements in order to verify regular income and affordability of the rent;
      3. Ask for references from previous landlords and follow up on these to check that there were no issues;
      4. You should always have a written lease agreement. Verbal agreements are perfectly legal and are fine as long as the lease is problem free. However, if there’s a dispute it can be difficult to enforce verbally agreed terms. A competent attorney can help you draw up a lease or you can use the standard residential lease agreement which is available at most leading stationers;
      5. Ask for a deposit. It’s essential to have at least one month’s rental in advance. Two or three would be much better.

      By all means, keep up the pressure on your tenants; hopefully, they will eventually catch up on the arrears or move out.

      Best of luck.

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