LANDLORDS WHO WON’T BUDGE
Tenants who have fixed-term contracts have the right to cancel the agreement – as do landlords. That holds even for those who say they’re ‘private people’
“DOES my landlord have to comply with the CPA?” It’s an interesting question, posed by Odette Schwegler, from Johannesburg, who is in a quandary because her landlord is refusing to release her from her rental agreement because he’s a “private person”.
Aren’t we all private people, one might argue?
Schwegler says she signed a 10-month lease to rent a house while hers was being renovated.
The building was completed before time – which in itself is quite remarkable for the industry – and they now need to move out of the rental property a month earlier.
“It’s our understanding that according to the Consumer Protection Act (CPA) we can terminate the lease as long as we give 20 (business) days’ notice,” she says.
So Schwegler gave the landlord two months’ notice but he refused to accept it, saying the CPA does not apply to him because he is a “private person and does not own a rental business”.
“Having rented out several properties in my personal capacity, I have always believed it did apply to me – and tenants have indeed exercised this right with me.
“If it does apply, what is a ‘reasonable penalty’? The rent is R20000 and we need to move out one month earlier.”
She ends off her letter with “only good things and green lights”.
Same to you, Odette. And the CPA does indeed give you the “green light” to move out a month early because you are trying to exit a fixed-term contract.
Property lawyer Cilna Steyn says she hears such claims from landlords, “at least 17 times a week”.
It’s a common misunderstanding of the CPA and fixed-term agreements and because there’s such widespread befuddlement about rights and obligations in terms of the act.
Section 14 of CPA applies to all fixed-term agreements that are entered into between two natural persons or one natural person and one juristic person.
It’s legalese for a social entity, a community or an association of people which has an independent right of existence under the law.
The CPA defines a juristic person broadly as a body corporate, a partnership, an association and a trust. Steyn says transactions between juristic people, regardless of their asset value or annual turnover, would automatically be excluded from the provisions of section 14 in its entirety.
Where the lessor is a natural person, but the lessee a juristic person or vice versa, the section would apply. Consumer Protection Law in South Africa, by Evert van Eeden and Jacolien Barnard (LexisNexis) explains in terms of section 14 of the CPA, the consumer may cancel a fixed-term agreement at any time by giving the supplier 20 business days’ notice in writing or other recorded manner and form.
The supplier – in this case, the landlord, because he is profiting from the fixed-term contract – may then charge a reasonable cancellation penalty, which must take into account the relevant industry practice; the amount the consumer is still liable to the supplier up to the date of cancellation; the value of the transaction up to cancellation; the duration of the agreement as initially agreed; provable losses suffered; the length of notice of cancellation; and the reasonable potential for the landlord, acting diligently, to find an alternate tenant during the notice period.
The focus here is on “reasonable” – it might sound wishy washy, but it’s usually no more than 25% of the outstanding value of the contract. Steyn cautions though that the landlord could still claim for any damages suffered, which “can’t be limited to a percentage”.
Steyn says Section 14 has had a substantial impact on lease agreements because it allows tenants to cancel agreements with 20 business days’ notice; it compels the landlord to provide the tenant with 20 business days to remedy breach of the agreement before the agreement can be cancelled; and it bars the landlord from early cancellation of the agreement unless there is breach of a material term of the agreement.
“Important to note, in this regard, is that an agreement is only governed by the CPA if the agreement is for a fixed term.
This means that the agreement is for a specified term and not on a month-to- month basis. However, an agreement that is governed by Section 14 will automatically continue on a month-to-month basis after the expiry or termination date of the lease agreement has lapsed.”
Section 14 also prescribes a notice to inform the tenant of the imminent termination date of the agreement. Not less than 40 and not more than 80 business days before the expiration date, the landlord must give notice of termination to the tenant, should he wish the lease agreement to terminate on the specified termination date.
“If this notice is not given, or not given correctly, the agreement will not terminate on termination date but will continue on a month-to-month basis.”
If this doesn’t convince your landlord, you could take him to the Housing Rental Tribunal, which will determine how “reasonable” he is about your deposit and what cancellation penalties will apply.