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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2,043 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Hi

    I recently signed a lease to rent a duplex. After 1 week living in the property, I could no longer open windows or breathe properly in the unit, due to fires (plastic and other materials) in the veld next door.

    The owner admitted to knowing about the problem and that the ward councilor had been contacted, an environmental study carried out and papers were served 3 months ago.

    I believe that breathing the air is a health risk to me. I would never have rented the property had this information been disclosed to me. I believe it will have a negative impact on getting a new tenant as the estate agent says they will have to tell prospective tenants now that they are “aware” of the issue.

    I have given notice to terminate lease, however, the estate agent says I could be liable for up to 2 months rental and the commission they would have gotten for the 12 months of the lease. I believe the information should have been disclosed to me and don’t believe I should be paying for the owner’s non-disclosure.

    Does the CPA cover me at all?

    Thanks
    Nicole

    1. Hi Nicole

      Whenever cancellation of a contract is contemplated, it’s always best to consult with an attorney.

      Lease agreements fall under the protection of the Consumer Protection Act (CPA) if the landlord is a “supplier”. The Act defines a supplier as someone who leases out property “in the normal course of business”.

      A supplier is entitled to levy a cancellation penalty if the lessee, in this case the consumer, should terminate the contract early. Usually the cancellation penalty is an amount equal to a months rent, but it can be more if it’s reasonable.

      Where the landlord is not a “supplier”, the lease agreement does not fall within the ambit of the CPA and the lessee is bound by the terms of the lease agreement. In such instances, if the tenant cancells early, the landlord can hold the tenant liable for the balance of the full lease period and for at least until a new tenant can be found.

      Notwithstanding the above, whether your lease falls under the protection of the CPA or not, the problem you’ve described is obviously a health hazard which interferes with your right to the undisturbed use and enjoyment of the leased premises. It seems the landlord knew about this problem before you signed and failed to disclose it to you.

      Consequently, you may have strong grounds to terminate without any negative consequences whatsoever, let alone the agent’s commission. It’s not impossible that you may even have grounds to institute a claim for damages.

      Perhaps you should consider consulting with an attorney on this problem. A lawyer’s letter is a moderate investment and will probably have the affect of getting the other party more sharply focussed on their contractual obligations. My guess is that the agent and the lessor will immediately back off. If not, you can simply have your attorney take care of it.

      Best of luck.

  2. Hi,

    Can some one advice me,

    I cancelled my lease after a month of signing it. I gave 1.5 months notice.

    The contract stipulates that the agency/landlord has a right to claim 1/3 of the outstanding lease amount (10 months rent). Is this in line with the new CPA?

    I was told to pay for this months rent (the 1st month after moving out) as the agency has not found anyone to re-rent the property yet.

    I agree that I am liable for the rent up until the agency finds a new tenant. I see this as part of the “reasonable cancellation charge” i.t.o the CPA. I understand that they have to be able to prove that they acted dilligently, and provide a breakdown of the damages they want to claim.

    They also give me a bad credit mark for not paying this months rent on the 1st.

    I dont feel like this agency is acting lawfully in this process.

    Your comments would be appreciated.

    1. Hi Louw

      Lease agreements fall under the protection of the Consumer Protection Act (CPA) if the landlord is a “supplier”. The Act defines a supplier as someone who leases out property “in the normal course of business”.

      Such a landlord is entitled to levy a cancellation penalty if the lessee (consumer) terminates the contract early. Usually the penalty is equal to a months rent, but it can be more if it’s reasonable.

      Where the landlord is not a “supplier”, the lease agreement does not fall within the ambit of the CPA and the lessee is bound by the terms of the lease agreement. In such instances, if the tenant cancells early, the landlord can hold the tenant liable for the balance of the full lease period and for at least until a new tenant can be found.

      It’s standard procedure to “blacklist” a tenant that pays late. An adverse listing by a credit provider or landlord has a retention period of two years and can make things difficult when looking for new leased premises.

      Hope that helps and best of luck.

  3. Hi John

    Can a lease agreement be back-dated?

    I moved into this house in July 2013 and we have always had a verbal agreement in place. The owner has given the mandate to an agency which is now insisting I sign a back-dated lease which is full of jargon I do not understand. It is not the standard lease agreement and I have read the Act of 1999 and there are a lot of items missing on the agreement, and the whole set-up is very unprofessional.

    When I asked or an explanation of the points I did not understand, I was told that it is totally legal and according to the Act, and either I sign it or I get a 30 days notice to move out of the house. I have mails attesting same.

    I’m at my wits end now, as she has given me a lease from last July (2015) to June 2016. So essentially I would be signing a lease for 4 months. Is this legal? I cannot sign anything that I do not understand. Is there someone or somewhere I could mail to assist me?

    I feel that the lease is biased towards the landlord. the lack of information requested is worrying. I am based in Johannesburg.

    1. Hi Sue

      Verbal agreements are considered to be as binding as a written ones, although in the event of any dispute the problem of proving verbally agreed terms is a factor. There is also nothing wrong with a lessor and lessee agreeing to backdate a written lease to reflect a tenancy relationship which actually existed.

      A much safer and more honest way to proceed, however, is for you to write a letter confirming that you have been a month-to-month tenant since July 2013 and for you to perhaps sign the new lease with a current date going forward. See if you can get the agent to agree to this.

      If you have rented a property on a verbal basis for some time and your landlord then asks you to sign a lease, you do not have to sign a lease with terms that are different to your verbal agreement. In such cases, the landlord is obliged to negotiate new terms with you and secure your agreement first.

      Bear in mind that you are currently on a monh-to-month basis and that either party can terminate your exisiting agreement with a month’s notice.

      Notwithstanding the above, you are entitled to insist that you be afforded the opportunity to have an attorney cast an eye over the proposed lease agreement before you sign. This might be the way to go if you are at all worried about clauses that require some explanation. The cost may be well worth it to avoid the potential pain of signing a lease agreement that you do not understand.

      Best of luck.

  4. Good day

    I have a question regarding my lease agreement and cancellation.

    I signed my lease agreement on 1st March 2015 and it expired 29 March 2016. It does state in the agreement that the lessee should inform the agent in writing 2 months before the expiration date whether they intend on vacating the premises or whether they wish to stay on.

    I did not sign a new lease and did speak to her telephonically on the 15 Feb 2016 to explain that im caught up in a situation and i cannot sign the lease as im not sure as to what is going to happen financially at the end of the month.

    Yesterday i gave her 1 months notice to vacate the premises. My question is can she hold the deposit as the agreement did expire and only 1 months notice was given and not 2? If it then runs on a month to month basis would I still need to give 2 months notice as per the agreement?

    1. Hi Bronwyn

      The two months notice clause, which is a standard provision in many lease agreements, is a common source of misunderstandings. It’s purpose is to prevent the lease reverting to a month-to-month basis on expiry, which is what normally happens if the lease is not renewed, in a situation where the lessee does not wish to continue on on a month-to-month basis.

      Presumably you signed a 12 month lease on 1st of March 2015 which expired on the 29th of February 2016. If that case, on the 1st of March 2016 your lease reverted to a month-to-month basis as you did not give the required two months notice.

      However, you did give a month’s notice on the 1st of March. Consequently, your month-to-month lease terminates on the last day of March and the agent is therefore obliged to refund your deposit in full.

      Hope that helps and thanks for your contribution.

  5. Hi

    I signed a yearly lease with my tenants in October 2015. I now wish to sell the flat. Can I sign a new lease for month to month, effectively an addendum to original lease?

    1. Hi Brendan

      You can’t unilaterally change the terms of your lease agreement, whether by addendum or not.

      A lease agreement takes precedence over any subsequent sale. In other words, if you sell your property before the expiry of the current lease agreement, the new owner must honour the terms of the lease for the duration of the agreement.

      Hope that helps and thanks for the question.

  6. Hi

    I have signed a rental agreement on a property and I need to cancel the deal. Am I allowed to?

    The rental period has not yet started and I sent a email to cancel the agreement because the property was advertised at a different price than originally thought.

    Am I allowed to cancel?

    Regards

    1. Hi William

      You may well be able to cancel. However, it’s difficult to say without seeing your agreement. Whenever cancellation of a contract is envisaged, it’s always best to seek the professional help of an attorney.

      An attorney will start by studying the terms of your agreement to see if you have valid grounds for cancellation. Then you’ll get an informed opinion as to what your options might be.

      Good luck.

  7. Good day,

    My situation is a bit complicated, but I will try to be brief. Our electricity was disconnected by Eskom almost two months ago due to the landlord establishing an illegal connection (prior to us moving in) and not paying Eskom since 2009. Our rental agreement is inclusive of water and lights so we had no way of knowing about this until Eskom arrived to disconnect us. We both work from home (freelance writers) so this has not only affected our personal lives but our careers as well.

    We initially had a 6 month lease (from August 2014) and when the time came for it to be renewed, the landlord made unilateral changes to the agreement. We pointed this out and asked him to amend the lease before we would sign it. He stalled for several months (despite numerous requests for the new lease) and increased our rent prior to providing us with the new lease. It was a small increase, so we agreed to it in an effort to keep things civil (our landlord has a habit of throwing tantrums and becoming very nasty when he doesn’t get his way!). He lives in Ireland so it is almost impossible to have a proper face-to-face conversation with him.

    He then stated that he did not want to send the new lease yet as he was having trouble with Eskom. The only thing we knew about that is what he told us – Eskom was apparently trying to charge him for a previous tenant’s bill because they (Eskom) had failed to close that account years earlier. He very specifically told us that it would not affect us as he had opened a new account for our tenancy and should Eskom try to circumvent the legal battle by disconnecting us, his lawyers were ready and waiting to lodge a spoliation order and the power would be restored within no more than 24hrs. We were assured of this on several occasions. He said he would provide a new one year lease as soon as his lawyers made progress with the case as he was looking at changing to pre-paid electricity and the rent would then have to be adjusted to account for us having to pay electricity separately (lowered to equal the same amount in total). We told him we were unhappy with having to wait and requested that a new lease be provided immediately. He ignored us until such time as Eskom disconnected our power supply. That is when we found out that it was an illegal connection as there was also a tampering fine and Eskom would not negotiate in any way until he had paid for all the years that were outstanding.

    We were sent to discuss the matter with his lawyers and it came out that he had lied to them as well. They knew nothing of the illegal connection. They also confirmed that should he wish to now exclude electricity (for any reason), the rent would have to be adjusted accordingly. They have since dropped him as their client and he has new lawyers, but we are unsure if they know the truth of everything.

    Our power has now been off since 08/12/2015. We received one month rent remit but it has been almost two months that we have not had power and not been able to use our home properly. We are spending a fortune on renting an office space, travelling to that location each day, travelling to do laundry and shower, buying food on a daily basis (we usually shop monthly), buying additional chemicals for the pool to minimize the effects of not being able to run the pump, etc.

    Last week the landlord sent us the new lease and he had increased the rent to almost double the amount and now excluded all utilities. Our original lease (which now applies as a periodic lease) states that the annual increase cannot exceed 10% and all utilities are included. He is obviously trying to take advantage of us by attempting to recoup his losses to Eskom from us. I do not believe that he can try to make us pay for his illegal dealings.

    I did my research and sent him legislature to demonstrate that he cannot make that unilateral change as the original lease governs all further leases and both parties must agree to the changes. He had an absolute tantrum and sent some very nasty emails. Eventually we simply told him to consult his lawyer with our letter and then revert back to us. Shortly thereafter, we received a call from him, which clearly showed that his lawyers had obviously told him that we were completely right as he backed down about the vastly increased rental amount. He then said he would email us later that day as he was busy.

    Later we received an email from him and then another from his new lawyers. Both suddenly state that he no longer wishes to renew the lease with us and that we must vacate the premises by the end of February. This is where my questions come in.

    1. I have been told (and read many articles to the same effect) that according to the CPA, he is required to provide us with a minimum of 40 business days (or 60 days) notice that the lease will not be renewed and that the periodic lease situation falls under this same ruling. We have not been provided with this length of notice. Can we contest on those grounds?

    2. I have also read in many places that according to the law in South Africa a verbal agreement is as binding as a written one – although it is obviously better to have the lease reduced to writing. Can this be used to assist us in contesting the refusal to renew as we very clearly had a verbal agreement that the lease would be renewed for a minimum of another 12 months? This can also be proven by the fact that he tried to get us to sign the lease (this week) with the increased rental amount. We also have several emails from him in which the new lease is mentioned (before and after we received it and were forced to contest the content) and surely this all goes to prove that the intention was to renew?

    It is blatantly obvious that he is only trying to get rid of us now because he is angry at having to pay Eskom for his crimes and he is trying to make us pay for that when it is through no fault of ours. Can he simply force us to move because we won’t be used to recover his costs?

    I know the advice from most people will be to just move, but we do not wish to do so and we believe in standing up for what is right and not just letting people like this get away with things that will then be done to others as well. This man needs to realize that he is subject to the laws of this country just as everyone else is – regardless of the fact that he works overseas.

    I am particularly appalled that he has tried to do this to us while we are still living without electricity due to his crime!

    I need some advice urgently, please, as I do not wish to pay my rent late (I always pay early) as that will count as a breach of contract and could ruin my chances of contesting the refusal to renew.

    I did send the complaint and all supporting documentation to the Rental Tribunal but they have not responded in any manner (it has been almost 4 days since I contacted them) and I am starting to panic about the rent payment deadline on Sunday.

    Is there perhaps something I can direct him to (or quote) that will help when replying to him and his lawyers about our intention to contest? I would be so very grateful for any help as the mental and emotional strain of this situation is causing me to be ill and severely depressed. I recently had surgery and am still recovering, plus I work full time and still have to deal with all of this as well.

    Thank you in advance if you are able to assist with advice on this situation.

    1. Hi Stacie

      Thanks for your detailed account of your problem.

      From your very first paragraph it’s evident that your landlord is in breach of your lease agreement — due to the illegal electricity connection which resulted in your power being disconnected. At that stage you could have gone to an attorney and had your lease agreement cancelled forthwith.

      Nonetheless, at the end of January 2016 (tomorrow) your lease will expire and, in the absence of a renewal, revert to a month-to-month basis. Either party can then give the other a month’s notice of termination. It’s important to understand that you can’t force the landlord to enter into a new fixed term lease agreement with you. You’ve already received notice to vacate by the end of February, so that’s that.

      The Rental Housing Tribunal will usually respond within 30 days of receipt of a complaint. However, I seriously doubt that the RHT will be able to do anything to assist you with this problem.

      You should be hugely relieved to be shot of this obnoxious and untrustworthy individual. I’m quite sure you would rather not have to put up with any more of the abusive tantrums that you’ve been subjected to in the past. In the interests of your health and for the sake of your peace of mind, take a deep breath and move on to greener pastures as quickly as possible. There’s not much the landlord can do about it if you take a month or two longer to find new premises — as long as you pay your rent.

      Good luck.

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