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

1,887 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Hi John,

    I signed a 18month lease. Our lease commenced on the 28th February 2013 and terminates on the 27th November 2014. We had given notice beginning of September 2014. According to our lease there was an annual rental increase of 10%. We had forgotten about the increase and had paid the original rental amount for the past months,

    The landlord did not notify us in the past 7 months that we were paying short in the rental and now that our deposit is due has decided to deduct the outstanding rental from the deposit. Can he do this? Also with the new tenant they had only increased the rental by R150, but he had deducted the full 10% increase from me; this is double the amount the new tenant is paying.

    1. Hi Nasha,

      It seems that both you and your landlord forgot about the 10% increase. However, even though it may seem unfair, your landlord is entitled to recover any unpaid rental amount from your deposit. The new tenant’s conditions of lease have no relevance to your agreement with the lessor. The lessor is entitled to ask a market-related rental, whatever that might be.

  2. Hi John,

    I have signed a lease agreement for 3 months on the 9th of September, but cancelled verbally on the following day. I spoke to the agent about my reasons of cancelling hoping to end the agreement in good faith. He said that he would consult with the landlord and come back to me. He did on the 15th of September, where I confirmed the cancellation in writing.

    On that day he sent a cancellation fee of 8 800 (commission refund: 7100, cleaning of premises: 950 and lease fee 750).

    I would like to know if this cancellation fee is reasonable and fair since I never occupied the premises and if the cooling off period applies in my case. Also I have received a letter of demand from the letting agency, not the landlord. I would like to know the consequences of not paying this cancellation fee.

    Your advise will be highly appreciated!

    Regards,
    Gabrielle

    1. Hi Gabriella,

      Without sight of your lease agreement, it’s difficult to know if these charges are fair.

      However, once a binding agreement has been entered into, early cancellation is likely to have financial consequences, whether the CPA applies to your contract, or not. You may be liable for the balance of the lease period, or for at least until a new tenant is found. Usually this means losing your deposit and incurring some additional expenses. It’s not possible to cancel a lease verbally. Neither is there any “cooling off period” applicable to lease agreements, that I am aware of.

      It would be best to have someone, preferably an attorney, peruse your contract for you. The cancellation fee may have been overstated by the lessor or the agent — or the fee may not be applicable at all. Your attorney could possibly help you settle this matter amicably. If you simply do nothing you risk having a default judgment taken against you for the debt and you may also end up with a bad credit record.

      Best of luck and thanks for your contribution.

  3. Hi John,

    I wonder if you can shed some light on my ordeal.

    I’ve been trying to purchase a property for over 1 year now and still I do not own it. After long last everything was paid and signed by both parties and we were all ready to lodge. Unfortunately the one seller / the husband passed away on the day of lodgement, so everything stopped.

    It has now been 6 months after his passing and still the property has not been transferred. There is a lot of infighting from his ex-wives laying claims over his estate, no executor has even been appointed.

    Do you know what my options are to get out of this horrendous and nightmare of a deal. My offer to purchase doesn’t mention a, “reasonable time frame,” but surely there must be something I can do as I heard winding up of estates can take 10 years or longer.

    Thank you,
    Rich

    1. Hi Rich,

      What has happened to you is possibly a ‘worst case scenario’ type of problem for buying property. My sympathies.

      The instant this property became part of the assets of a deceased estate the process of transfer of ownership went to a whole new level. On top of that, you have ex-wives and minors involved and the potential for complications goes up incrementally. For example, a common hold-up in such cases is that the heirs either can’t agreed on an Executor, or they are disputing the designated candidate.

      The appointment of an Executor requires the approval of the Master of the High Court. Major delays can result if the Master orders that certain requirements must be met before the appointment will be made.

      It may be worth your while to consult with an attorney who can peruse your paperwork, consider all the evidence and give you an informed opinion.

      Good luck. Please let us know what the outcome of this is.

  4. A friend of mine is about to move out of a house she has been renting for the past year. Her Landlord is living overseas and has made her time living in the house a nightmare, accusing her of so many things that he has heard from neighbours and “friends” which I know are untrue.

    The whole rental agreement was drawn up through a local agent who the landlord has been dealing with and he has now instructed the agent to hold on to her deposit until he comes out on holiday in January next year so that he can inspect the property himself and make sure he is satisfied with it. My friend is moving out at the end of September into a new rental and obviously needs the deposit for her new lease.

    Surely he has no right to instruct the agent to hold onto the deposit to suit him? What if something happens to the house between my friend moving out and him coming to inspect it? Surely the agent has to inspect the house and if she is happy that it is all in order she has to hand over the money?

    Please advise – I look forward to hearing from you.

    1. Hi Donaldson,

      Rental deposits are regulated by the Rental Housing Act 50 of 1999. Landlords are required to invest deposits in an interest-bearing account and make a refund, together with interest, at the appropriate time. Section 5(3) states deposits must be reimbursed:

      — Within 7 days of the expiry of the lease, if there are no damages or deductions, or if the landlord failed to inspect the property together with the tenant
      — Within 14 days of the finalization of repairs, if there are repairs to be carried out
      –- Within 21 days of expiry of the lease if the tenant failed to inspect the premises together with the landlord

      It is the function of Rental Agents to conduct exit inspections on behalf of the landlords they represent. There’s no way an agent or landlord can postpone the exit inspection and hold on to your friend’s deposit.

  5. I viewed a house yesterday and we decided to take it. I went back to my office and paid R 9500 – the balance of R 3626 to be paid on Thursday…the amount of R 12 500 made up as follows. R 7000 Rent, Non refundable deposit, R 2116.80 Admin Fee 950 and electrical deposit R 2560. I have not yet signed a lease.

    I took my family there today and they pointed out flaws I hadn’t notice, eg, that our dogs could get out of the property, the bedrooms are too small to accommodate a bed and a cot; the inside stairs are not safe for a 9 month old baby. Will I lose my money and if so how much?

    1. Hi Cherry-Anne,

      Congratulations on your baby! I can certainly appreciate your reasons for changing your mind; these things do happen.

      Generally, a verbal agreement is perfectly legal and binding. The problem with verbal agreements is that the terms of such agreements can be difficult to enforce and often lead to intractable disputes that are always a nightmare to resolve.

      However, in this case, by paying the rental, deposit and the other items you mentioned, you may have inadvertently helped to establish the terms of a binding verbal agreement. Your landlord may have indicated acceptance of you as tenant by receiving payment.

      Unless you can come up with a suitable replacement tenant, you will probably lose your deposit. It’s perhaps worth your while to ask for a full refund, anyway; you might get lucky if you ask nicely. You could even do this in person with your young babe in arms, maybe just before feeding time . .

      The ‘Admin Fee’ may be charged provided that the related costs can be substantiated; you’re entitled to ask for the invoices as prove of expenditure. You should definitely get the rest back and if you don’t, it would be best to consult with an attorney.

      Best of luck.

  6. Can the lessor increase the rent without notifying you although its passed a year agreement. And if there were no improvements done in the flat can they increase the rent or even though I have been telling them for over a year.?

    1. Hi Sibs,

      If I understand you correctly, your 12 month lease agreement has recently expired. If that’s the case, you are now renting on a month-to-month basis on the same terms and conditions as the original fixed period lease agreement. Your landlord is entitled to raise the rent at any time after giving you a month’s notice of the proposed increase. You would be free to accept this increase or move.

  7. Hi John
    I have tenants in my house and renting out through rental agents.
    There was natural damage to my house in June which I was not made aware of. They actually only informed me of this today.
    Because it is 3 months along the line, my insurance does not want to pay out the damages as the claim was supposed to be logged within I think they said 2 weeks.
    Who is responsible for repairing this if my insurance would’ve done it if I claimed in time?
    Thank you

    1. Hi Charlene,

      Without seeing your documentation it’s a little difficult to comment. You really need to consult with an attorney who can peruse your rental agreement, your mandate agreement with the agent and your insurance contract. Only an attorney can really give you an indication as to who may be liable for the damage and what the best course of action might be. If it turns out that your agent has been negligent you may have legal recourse.

  8. Hi John

    We have a lease agreement with a rental agency, for a year. When we went to view the property the first time there was a lot of work to be done. On the date we were to move in the owner as well as the rental agency promised that everything that still needed to be done will be done.

    It is now 6 months later and still nothing has been done. It is appalling conditions at this stage and when we offered to fix it ourselves and to then deduct from the rent they agreed at first. After we started some of the repairs, the agency informed us that the owner now wants to sell the property and he therefore will no longer be fixing anything and we are also not allowed to make the repairs.

    Do I have the grounds to give a months notice without being liable for the rest of the lease term rent as I feel that the owner and agency have breached the contract?

    1. Hi Shaneen,

      If you terminate with a months notice, unless you are on a month-to-month lease, you may be held liable for the balance of the lease period. You could also lose your deposit in the process.

      Instead, you could try to negotiate an amicable outcome. Your landlord may be a distressed seller who is in a precarious financial position. This could well be the reason why the seller has placed the house on the market even though it’s hardly in a saleable condition at present. It may be difficult to attract a buyer if there is work to be done on the property, particularly if there is a lease in place; a new owner is obliged to honour any existing lease agreement.

      In the event that your landlord agrees to cancel the lease, you should consult with an attorney to ensure that you extricate yourself from this situation without suffering any unintended consequences. If your landlord refuses to come to the party and remains in breach of your agreement, it’s time to see an attorney anyway. An attorney can put your landlord to terms and help you cancel the contract.

      Best of luck.

  9. Hi John

    I signed a one year lease commencing 1 April 2012. I have lived in the property since. There has been no communication from the landlord regarding renewal of lease in over two years. I assumed it fell to a month-to-month contract based on the initial agreement.

    In the lease agreement signed it states “Should the option be taken to renew the lease, the rent for such further period payable similarly shall increase at 8% per annum”

    I was then contacted on 26 August 2014 via a note in my letterbox from the landlord, explaining that as rent had not been increased in 2 years, I am now expected to pay the twice increased rent as well as pay the full retrospective amount that would have been owed if renewals had taken place.
    I.e. Monthly I now ‘owe’ my current rate + 8% + an additional 8%. I am also expected to pay the outstanding amount that would have been incurred if renewals had taken place timeously.

    I thought, based on CPA, this was an illegitimate claim?

    Please advise!

    Thank you so much.
    Regards
    Alix

    1. Hi Alix,

      You are correct in assuming that the initial contract would revert to a month-to-month contract, but it would be on the same terms and conditions as the original fixed period lease. So may be safe to say that the landlord is entitled to implement the increase that you agreed to contractually.

      I’m not to sure about the ‘arrear’ rentals your landlord is demanding. It may be best to consult with and attorney, have your contract perused, to see how your lease agreement addresses the issue.

      Good luck.

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