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

1,869 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Hi John,

    We signed a two year contract in July 2014. We found a bigger house that suit our needs better and gave a 2 month notice. The landlord is asking for penalties for 10% of the two year contract period in the amount of R12000.00. Is he entitled to do this?

    1. Hi Mariet,

      It’s difficult to answer on the limited information you’ve given and without seeing your contract. However, it seems about the right ball park.

      Whether the CPA provisions for early cancellation apply or not, you can expect to forfeit at least your deposit and possibly more, depending on the details.

      If you are still in doubt it would be best to have someone, preferably an attorney, peruse your lease agreement and advise you accordingly.

  2. Hi John,

    I currently have a lease in place with a rental agency for 12 months. When I went to view the apartment about 6 weeks ago I noticed that there was some work to be done, which the agent assured would be done.

    Upon my arrival on 01.08.2014 I walked in to a disgusting site; the apartment was not cleaned properly, walls were never painted, flooring was damaged and the worst the toilet was completely ruined, leaking and the bowl was broken. The toilet door was even broken too.

    Hypothetically, if this agency is unable to get replacement quotes approved from the owner of the apartment building, what would be my next step?

    1. Hi Larnelle,

      Without sight of your lease agreement, it’s a little difficult to comment. What does your lease agreement say about accepting the condition of the premises “as is”? Do you need to complete a snag list, and by when? Did the agent undertake to make any repairs in writing?

      One of the first things to do is perhaps to complete a detailed snag list and to take colour photographs of everything. You want to illustrate the general condition of the property when you moved in. At the very least this will help when you leave — to make sure that you are not held liable when you move out and it’s time for your exit inspection.

      The next thing is to have someone, preferably an attorney, peruse your lease agreement and give you some informed advice on the options that may be available to you.

      Once you’ve got this far you may decide to get the quotes yourself, for the essential items such as the broken toilet, toilet door and so on. Then you might arrange to have the work done and deduct the cost from your rent. You would have to provide the agent, copying the landlord if possible, with copies of your invoices to prove your expenditure.

      Best of luck.

  3. Hi,

    I signed a lease for residential property on 19 July 2014. But when I moved in I realized the property has been burgled and there are still marks in the doors to prove it. So I decided to cancel the lease on 22 July 2014.

    My question is, will I be able to have my deposit be refunded as this time falls within 5 days cooling off period? On the lease agreement it doesn’t say anything about cooling off period.

    Regards,

    Thabang

    1. Hi Thabang,

      The information you’ve provided is a bit scant and consequently it’s difficult to answer your question in detail.

      Nevertheless, it’s safe to say that whether the Act applies to your lease or not, it will cost you your deposit if you cancel early. Unfortunately, the fact that the property has suffered a break-in at some time before you moved in is probably not a valid reason to terminate your lease agreement.

      The 5-day cooling-off period that you are referring to applies to any transaction that is the result of direct marketing. If you went to see the property before you signed the lease, your decision to sign was not the result of direct marketing and no cooling off period would apply.

      To limit your liability you could help to find a new tenant.

      Best of luck, and thanks for your contribution.

  4. Hi John,

    I have a one year lease for an apartment rented through a rental agency. I found and bought a house within this one year period and subsequently had to break the lease agreement (during month 5 of contract). I notified the agent and gave more than 3 month’s notice.

    I am not sure if they found a tenant for the apartment as yet. (We have had numerous people coming to view).

    If they have not found a tenant, would I still be liable for rent when I have moved out. The agent mentioned on one occasion, when bringing around a potential new tenant, that we need to find someone else or we are liable.

    Thank you
    Lieschke

    1. Hi Lieschke,

      As mentioned in the article, unless the owner of the property is a “supplier” as defined by the Act, you may not cancel early. If you do, you may be held liable for the balance of the lease period, or for at least until a suitable tenant is found, irrespective of the notice you have given.

      You could try to help resolve your problem by doing what you can to find a new tenant. The agent is not obliged to accept your proposed substitute, but it would be difficult to see why not if it’s a suitable replacement.

  5. Good day John
    We are in the process of letting out a property in which the tennants will operate a food business in a seperate building on the property and reside in the main house [apart from the business].
    Which type of lease would be better suited for us – Commercial or Residential or could one combine the two.
    They also want the lease drawn up in the name of the company [a cc] whereas a residential lease is in the personal name of the leasee. What are the legal aspect should they decide to pack up & leave one day without notice [the house will be fully furnished]
    Kind regards
    Leanne

    1. Hi Leanne,

      The legal advice you are seeking is best provided by an attorney, which I’m not.

      I’m not sure that it would be wise to try and address two different types of agreement with one contract. It may be best to separate your agreements; a residential agreement for the main house and a commercial lease in the name of the Closed Corporation (CC) for the building housing the food business. A properly drafted commercial lease agreement can go a long way to limiting your risk in this transaction. For example your attorney may draft a clause which binds the members of the CC in their personal capacities.

      Know that two thirds of all start-up businesses fail within the first two years. For this reason, it’s not unreasonable for you to require at least two, preferably three, months deposit in respect of each lease agreement as security.

      Good luck.

  6. When we rented the house we were told the pool was turned into a garden but it was done correctly and holes were made at the bottom of the pool to drain the rainwater.

    This is not the case. When it rains the pool fills up and it becomes a swamp. We had a mosquito epidemic. I phoned our agent and she said the landlord would not spend any money on the pool as the house was bought to renovate in the near future.

    I asked her what we could do about it and we were ignored. We had to buy a pump and every time we have a bit of rain we have to hand pump the water out of the pool.

    I signed a years lease and have been in the house for 6 and a half months I gave a month and a half notice as I want to vacate the premises by the 1st of September before the rain starts . I was told that I would be liable for the rest of the months lease if she could not find a tenant, and that I should just be aware that my landlord is an attorney and her husbands a lawyer so I should know what I’m up against.

    I asked her if I could get other agents to rent out the property and she said she was the only one that could.

    What are my rights?

    1. Hi Jill,

      Seeing that the agent has made ominous, if not threatening, noises that your “landlord is an attorney and her husbands a lawyer” you would do well to consult with an attorney, have your attorney peruse your lease agreement and advise you as to the options that may be available to you.

      Often the mere act of getting an attorney involved may help to bring some clarity to the situation and may also have the added benefit of getting the other party more focused on their contractual obligations.

      It’s important that any action you take is procedurally correct if you are to be successful. An attorney is your best bet to help steer you through this situation. Many top rate attorneys will give free basic advice at the first consultation so you really have very little to lose.

      Best of luck, and thank you for your questions.

  7. Hi John,

    I’m leasing my property out through an estate agent. She deducts money from the rent for repairs made without consulting me or even informing me that there is a problem.

    Some of the deductions I feel is not for me but for the tenants-things like blocked drains, broken windows, etc.
    She does send me the invoices afterwards, but with no explanation. I also only receive my rent from her on or after the 15th of each month after numerous phone calls and emails-also without any explanation.

    The contract stipulates that no moneys can be deducted from the rent and also that the rent needs to be paid into my account on or before the 15th of each month. What can I do here?

    Thank you

    1. Hi Charlene,

      There is no reason why you should put up with bad service. Have a look at your mandate agreement with the agent to see what provision there might be for non-performance of the agent’s obligations.

      Start by listing each breach of your mandate agreement and request remedial action within a reasonable time frame, say by end of the next 15th of the month. Preferably, do it in writing. You could make it clear that you intend to cancel your agreement for non-performance if the agent refuses to come to the party.

      If the agent slips up again, you know what to do.

      Best of luck.

  8. Hi John,

    I rented my house to a construction company. They gave me their month’s notice. I went to check on the house and discovered the remote gate and rail are not functional anymore, and that there is other damage to the property. Quote to repair is R38 000-00. They inform me they will return to do the repairs at a later stage.

    I don’t know what to do about them? They move out at the end of the month. July 2014. How do I get them to commit to the repairs? I have requested it in writing , but was informed that the site manager is in Zambia.

    Thanks Adele.

    1. Hi Adele,

      You didn’t say but ideally you should be in possession of a month or two in deposit monies that you can withhold, as security, until the gate is repaired. If not, your options may be limited.

      In any event, it may be best to get in touch with an attorney as quickly as possible.

  9. I currently have a lease in place of one year which took effect 1 May 2014. The lease clearly states that the landlord and the tenant each have to give two months notice of intention to renew the lease, or alternatively vacate the premises, when the lease expires on 30 April 2015. I am not in breach of any of the lease clauses.

    On 1 July 2014 the owner gave me two months notice to vacate the premises as he wants to move back into the house. I have been renting this property since 1 April 2012, and the lease has been renewed each year on anniversary for a further year. This is therefore my third year of leasing this property.

    I am on very good terms with the landlord and obviously wish to maintain this relationship. Can he give me notice arbitrarily to the contract? I wish to remain in this property for the remainder of the lease.

    1. Hi Petra,

      There is no way that the landlord can remove you against your will if you are not in breach and if you wish to stay on.

      Let the landlord know politely but firmly, and preferably in writing, that you do not wish to vacate and that he can not force you to do so. If you receive any legal notice after that, it would be best to see an attorney. My guess is that you’ll hear nothing more.

      Best of luck, and thanks for your contribution.

  10. Hello John,

    Possibly you can provide me with some advice. I operate a small restaurant in Franschhoek which leases the front main road space from a guest house. The guest house has been sold and the new owners require the space back from me despite my significant investment in the space.

    They have issued me with 12 months notice to vacate but have started rebuilding/renovations etc. The lease agreement allows them to do this within reason with regards to the minimum of interference to my business. I believe I have a bona fide case to challenge the rebuilding clause as the work will be done long before the 12 months is up.

    They have now also put up netting blocking the view to my restaurant from the road which was always a major selling point as 50% of my paid rental is outside on the terrace and garden. The lease also states that I am not entitled to any remuneration from their side for loss of business. The lease agreement with terms and conditions was signed before the Consumer protection act came into effect.

    The bottom line is that the new owners (corporate) will in essence kill my business and force me to vacate the premises ahead of the 12 month period so that they can reopen under their new branding and very likely operate the restaurant and established good will of the venue on their own despite me being the one who invested so heavily in the first place.

    I am looking for any sort of advice, please feel free to contact me via my provided email.

    Regards
    Ryan

    1. Hi Ryan,

      Commercial leases are intended to cater for the specific needs of commercial tenant and landlord and are relatively complex compared to the average residential lease. There’s no general advice I can give you, without seeing your lease agreement, beyond that you should have someone, preferably an attorney with commercial experience, peruse your lease and advise you as to what options may be available to you.

      Good luck.

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