IMPACT OF THE CPA ON LEASE AGREEMENTS

Impact-of-CPA-on-lease-agreements

You might assume that a lease agreement is governed only by the terms and conditions which appear on its pages. However, because both the right to property and the right to housing are enshrined in the Constitution, South Africa recognises a number of other laws which will affect the terms of your lease.

Of these laws, the Consumer Protection Act No. 68 of 2008 (“CPA”) is of particular importance as it promotes fair, open and good business practices between the suppliers of goods or services and their consumers. Leases are included in the definition of services and the CPA will apply to all leases, unless:

(i) The landlord (supplier) is not leasing the property in the ordinary course of business; or
(ii) The tenant (consumer) is a juristic entity (a company, partnership or trust) and has an annual turnover or asset value which equals or exceeds R2 000 000.00 (two million Rand).

Here is a summary of the impact that the CPA will have on your lease agreement:

1. Marketing the property:

The CPA finds its application before you’ve even put pen to paper. A property cannot be marketed in a manner which is directly or indirectly false, misleading or deceptive and uses exaggeration, innuendo or ambiguity or fails to disclose a material fact. A consumer is able to make an informed decision when the facts presented to true and accurate.

2. Fair, reasonable and just terms and conditions:

In the spirit of promoting the fairness for which the CPA was enacted, the terms of a lease agreement must be written in plain and simple language, must be easily understandable and cannot contain terms which are unfair, unreasonable or unjust. Tenants cannot be expected to unfairly waive any of their rights, assume any obligation, or waive the liability of a landlord, and where such limitations, risks or obligations exist, a landlord must “conspicuously” point these provisions out to the tenant.

3. Length of lease:

Long-term or fixed-term lease agreements which fall under the CPA are restricted to a maximum period of 24 (twenty four) months unless the parties expressly agree upon a longer period and the landlord is able to show that there will be a demonstrable financial benefit to the tenant by increasing the duration of the lease.

4. Cancellation due to breach:

A lease agreement will usually contain provisions which direct that the lease may be cancelled in the event that a defaulting party fails to remedy a breach after having been called upon to so, in writing. According to the CPA, and despite the terms of the lease agreement itself, the tenant must be afforded at least 20 (twenty) business days within which to remedy any material breach before the landlord can cancel the lease agreement.

5. Expiry of the lease:

In order to ensure that there are no misunderstandings, a landlord is required to notify a tenant that the lease will be coming to an end. The notification should be delivered between 80 (eighty) and 40 (forty) business days before the expiration of the lease and should contain the following information:

(i) the expiration date;
(ii) the options available to the tenant, if any; and / or
(iii) the material changes that will apply if the lease agreement is renewed or extended beyond the expiration date.

Where the tenant is afforded an option to renew the lease or where the landlord fails to notify the tenant of the expiration date, the fixed-term lease agreement will automatically continue on a month-to-month basis, subject to any material changes contained in the landlord’s notice, if any, unless the tenant expressly requests that the landlord terminate the lease agreement or agrees that the lease agreement should be renewed for a further fixed term.

Month-to-month lease agreements may be terminated by either party on one calendar months’ notice.

6. Early termination of the lease:

Provided that the terms are fair, reasonable and just, the parties may include in their lease agreement an early termination clause which specifies the minimum notice required in order to cancel the lease before the expiry of the fixed term. Where the lease agreement is silent on this issue, only the tenant may cancel the lease agreement early by affording the landlord at least 20 (twenty) business days’ written notice of their cancellation.

The landlord’s recourse in such instances is to impose a “reasonable cancellation penalty” which takes into account various factors such as the length of notice afforded to the landlord, the remaining period of the lease agreement, the potential for the landlord to place a new tenant and the costs associated with doing so, and the actual damages which the landlord suffered as a result of the early cancellation.

The cancellation penalty cannot be imposed if the property was leased as a result of direct marketing and the tenant cancels the lease agreement within 5 (five) business days of the lease being signed or taking occupation of the property.

Feel like you need a little more information? Contact us via email admin@englandslabbert.co.za or via http://englandslabbert.co.za/contact/