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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2,001 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Hi,

    I have a tenant who signed a 12 month contract – December 2014 to November 2015. I have sold my house and have told the tenant recently about the sale and that the new owner does not wish to take over his lease.

    The new owner wants vacant occupation on 1 December – one of my conditions for the sale of the property (taking the tenant’s lease agreement into consideration) was that the transfer be effected at the end of November. His lease agreement will therefore not be renewed at the end of November. He has now given me 2 months notice – moving out in September.

    Can I charge him a penalty fee of 2 months (there are 4 months left of his lease agreement) based on the fact that I will not be able to find a new tenant due to the fact that I am only going to be the owner until the end of November – surely this will constitute a “reasonable penalty” as I am going to suffer a loss of 2 months rental income and I will not be able to mitigate my loss due to the sale of the property?

    1. Hi Wendy,

      You are classified as a supplier in terms of the CPA if you rent out property in the normal course of business. In that case, your tenant is a consumer and is entitled to give 20 working days (effectively one month) notice. The fact that you’ve been given an extra month’s notice doesn’t help you much; the two month penalty you envisage would certainly seem reasonable.

      Bear in mind that if you only let out the occasional property, and this does not form part of a business activity, you’re not a supplier and the CPA does not apply to your contract; your tenant would still be liable for the two months remaining.

  2. Hello

    I have come across your site on the internet. One does not really know who to ask when it comes to questions of renting out accommodation. Any advise you can give will be much appreciated.

    I have a house with two cottages on it. It is in Gauteng. My son and his family live in the main house. A gentlemen lives in the smaller cottage. There is a larger cottage as well.

    I have just rented out the larger cottage to a couple. I did explain to
    them that the people on the property are very quiet and there is a baby. I sympathized with them as they said they were in a terrible place and needed to get out.

    They paid the rent for the month and a deposit. They also have a dog but I did agree to that as long as the dog did not bark incessantly. The dog so far has not been too bad.

    I have a one page document where I say that the rent is on a month to month basis and that should notice be given it must be given prior to the 25th of the month of the month preceding vacation.

    These people have only been there a few days and they are causing
    problems. Loads of people in and out and little children. The lady in
    particular is very loud and quite rough and last night when I was there she was swearing; I just happened to be there and she was carrying on at someone else.

    This is not a good impression for my grandchildren and I basically want them out. What do I do? Can I give them a letter. And when will they have to be out?

    This renting is another story really and can cause a lot of stress as
    people are not always what they seem.

    I really used bad judgement here. I am usually am fairly level headed. I was retrenched last year and there has been a lot of stuff going on and I should have used more wisdom and been more assertive when taking someone.

    Please can you advise me.

    Thanks so much for your time it is much appreciated.

    1. Hi Cheryl,

      As your lease agreement is on a month-to-month basis, you can simply give a month’s notice. You should do this in writing before the 25th of the month preceding vacation, as stipulated in your contract. You are not required to give a reason.

      If you have problems, for example if they refuse to move, don’t delay; get professional help from an attorney immediately. Should you allow these people to stay on after you have given notice, and without any swift consequences, they could seek protection under the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act 19 of 1998 (commonly referred to as the PIE Act). This legislation is intended to prevent arbitrary evictions. However, unscrupulous tenants often use this as a means to get a free ride.

      You may want to consider using a competent letting agent to help find a good replacement tenant.

      Best of luck and thanks for your question.

  3. Hi John,

    My lease via an agency is coming to end in December. Today i received an email from the agency to say that i am not allowed to renew my lease directly with the owner as he (the owner) had subsequently also give the agency notice to terminate his letting mandate.

    What are my rights?

    Kind regards
    Laine

    1. Hi Laine,

      You’ll not be able to renew as your existing lease is probably on the agency’s stationery, and their letting mandate has recently been terminated. However, when your lease expires in December you’ll be free to enter into a new lease agreement with whomever you please.

  4. Hi John

    I own a property and the tenant has signed a lease until March 2016. However, due to unforeseen circumstances, I would like to cancel the lease agreement and move in. I am leasing the property through a rental agent and she says that 2 months notice is all the tenant needs from me ? My question is: Can I give the tenant 2 months notice even though the lease has not expired?

    Thanks,
    Thea

    1. Hi Thea,

      You have been misinformed. There is no way that a binding lease agreement can be terminated for anything other than a material breach of the lease terms, in which case there is a set procedure that must be carefully followed. The landlord is required to give the tenant proper written notice of the breach and a reasonable opportunity to rectify before any further action can be taken.

      A material breach includes things like non-payment or late payment of rental. Unfortunately, if you have a good tenant that is abiding by the terms of your contract, there’s not much you can do.

      However, there’s nothing to stop you from attempting to negotiate an amicable settlement. You could offer to pay relocation costs, for example. Be careful how you go about this though. You want to avoid being accused of harassment which is a punishable offense under the Rental Housing Act.

      Good luck and thanks for your question.

  5. Hi John – We are a small “legal” entity that has signed a 3 year lease with our landlord. In this year we have had squatters and vagrants sleeping in the corridors, smoking tik pipes and leaving a mess behind. We have had break ins because their is no night lighting maintained,. We had our shop robbed and the landlord ignored our request for assistance, in fact they did not even secure the premises. How can we get out of this lease?

    1. Hi Liza,

      Whenever cancellation is envisaged it’s always best to get an attorney involved. You need to have your lease agreement perused so that you can get an informed opinion as to the options that may be available to you.

      Often, the mere act of appointing an attorney can get the other party more focused on contractual obligations. Ideally, you want your attorney to help you negotiate an amicable solution to your problems, and alternatively, cancel your lease agreement.

      Best of luck.

  6. Hi John,
    I bought a property to lease recently. The tenant is a juristic person and insists on working only through letting agents. I, however wants to lease the property directly. What do i stand to do?

    Thanks,

    1. Hi Diekus,

      The information is a bit sparse, but I will do my best:

      A juristic person is a legal entity, such as a Closed Corporation (CC), a company or a Trust. Presumably your tenant is one of these and you already have a lease agreement in place through a letting agency.

      All letting agents operate in terms of a written letting mandate agreement, granted by you as the owner, to let out the property. In order to lease directly one would have to wait until the existing lease agreement expires, having given sufficient notice that the contract will not be renewed. You would then need to terminate your letting mandate agreement with the letting agent, preferably in writing.

      Ideally, at this point it would be wonderful to have a replacement tenant on hand to sign the new lease.

      Best of luck. Please let me know if I made any wrong assumptions; not impossible.

  7. Great Article. Thanks for the info. Does anyone know where I can find a blank Rental Lease Form to fill out?

    1. Hi Joyce,

      Thanks for your kind remarks.

      Most stationers stock a standard residential lease agreement. A good example is the Hortors one, available from Waltons and other outlets. It’s about 30 bucks. Has everything you need in a simple agreement and is also CPA compliant.

  8. Hi John,

    My wife let out a property she has in JHB several years ago. The same tenant has been in the property since then. A 24 month renewal lease was sent to the tenant several months ago but the tenant has still not signed it. My wife has since decided to sell the property and the tenant is claiming that she has the right to now stay until the end of the “new lease” that she did not sign – stating that she will be taking the case to the tribunal.

    Does the tenant have the right to do so, or does the lease automatically revert to a month-to-month basis die to the fact that it was not signed?

    If it falls into a month-to-month, surely the tenant could just sign the lease and date it as at the beginning of the lease term?

    Please advise.

    1. Hi Dave,

      On expiry of a fixed period lease, in the absence of a new fixed period agreement, the contract reverts to a month-to-month basis, with a month’s notice required of either party to terminate. No reason need be given.

      At any time you can negotiate a new fixed period agreement, so yes, “the tenant could just sign the lease and date it as at the beginning of the lease term”.

      Your tenant’s threat to take the matter to the Rental Housing Tribunal (RHT) is a bit of an empty one as it’s quite likely that the RHT will find in your favour regarding the unsigned lease.

      If you’re planning to sell, you might want to consider leaving the property vacant while it’s on the market. Tenants can be notoriously uncooperative when prospective purchasers come looking. You could simply give your tenant a month’s notice and get an agent in to get the marketing going.

      Good luck.

  9. Hi John,
    We have signed a lease agreement in Durban for the period of 12 months with an agency in March 2015. My husband was notified this week that he is being transferred to the company’s head office in Pretoria within the next month or 2. We have no other choice but to relocate. We will have to give notice to the agency that we will have to terminate the contract, but I’m a bit worried about the breach of the agreement. What are our rights as tenants when we have no choice but to terminate due to a transfer? Would really appreciate your assistance.

    Kind regards,

    Marisa

    1. Hi Marisa,

      Whenever cancellation is envisaged, it’s always best to consult with an attorney — which is what you should consider doing in this instance.

      Although you have little choice but to cancel, you can expect to be held liable for a few months rent, or at least until a new tenant can be found, plus any reasonable costs such as advertising. Of course the extent will depend on the terms your lease agreement.

      Usually this type of expense may be recovered from your employer. Most companies make provision for reasonable relocation costs when transferring employees. This would be a good time for your husband to ask if you are covered. Then see an attorney.

      Good luck, and thanks for the question.

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