Before you cancel the lease…
Financial hardship may cause tenants to downgrade to more affordable premises. Make sure, however, that cancelling your lease doesn’t lead to further costs.
Many tenants will now be looking to downgrade to more affordable premises and will need to cancel their leases.
“If you’re unable to keep up with your monthly rental, then the sooner you take action to move to a more affordable space the better,” says Samuel Seeff, chairman, Seeff property group.
However, depending on the cancellation clause in the lease agreement, cancelling a lease prematurely may result in tenants being in breach of the contract.
Some landlords are struggling too
“Cash-strapped homeowners, meanwhile, are trying to let out any spare space they have to make ends meet,” says Gerhard Kotzé, MD, RealNet estate agency group. “Whether you’re a tenant or a landlord in this situation, you should always make sure your rental agreement is in writing. This is not only a requirement of the Rental Housing Act, but the best way to avoid confusion or future disputes about the terms of the agreement – especially if it was concluded in haste.”
Cancellation clause
“Unless there are grounds for cancellation of the agreement, as stipulated in the cancellation clause, it can be rather difficult to get out of a lease agreement without any recourse,” explains Adrian Goslett, regional director and CEO, RE/MAX of Southern Africa.
As a tenant you can cancel your existing lease in terms of the Consumer Protection Act (the CPA), section 14, by giving twenty business days’ notice, but make sure this is done in writing. However, this does not completely absolve the tenant of any responsibility. “If a landlord has met all the conditions of the lease, the tenant cannot simply terminate the lease agreement. They’ll have to discuss the matter with the landlord and agree on a solution, such as another tenant taking over the current lease agreement or subletting the property for the remainder of the lease period.
“It’s imperative that any agreement made between the two parties is in writing to avoid any confusion or backlash further down the line,” Goslett says.
The landlord can charge a reasonable cancellation fee which will take into account time and costs needed to get a new tenant. Most contracts now stipulate a reasonable penalty, says Seeff.
“While the CPA doesn’t stipulate what would be considered a ‘reasonable’ figure, the landlord cannot make up exorbitant figures and charge the tenant what they feel like. It’s also illegal for the landlord to withhold the deposit unless there are substantial damages to the property which the tenant caused,” Goslett clarifies.
Landlord in the wrong
In the instance where the landlord has not upheld their end of the bargain and is therefore in material breach of the lease agreement, Goslett explains that the tenant will be able to cancel the lease agreement without having to pay penalties.
“Examples of this are if the property has become uninhabitable or the landlord has failed to maintain aspects of the property that they have stipulated in the lease agreement they would. In these situations, the onus is on the tenant to prove that the landlord is in breach of the contract.”
Notice period
Tenants who have reached the end of their lease agreement and are planning to move, should check their contract to see whether it contains a renewal clause, which will stipulate the required notice period.
At the end of the notice period, your deposit together with interest must be refunded to you within 14 days in terms of the Rental Housing Act. The landlord can, however, deduct outstanding rent and the cost of damage repairs, says Seeff.
“To avoid damage repair costs, ensure that the property is in the same condition as it was when you took occupation. Make sure you attend the exit inspection with the agent or landlord to agree on damage and the cost of repairs (if any) and to return the keys. If you don’t attend, you could be vulnerable in terms of what the landlord could deduct for damages,” he explains.
Next time
Before you take occupation, ensure that you enter into a professionally drawn up lease agreement which protects your interests as well as those of the landlord. Ensure the early termination penalty is quantified upfront, Seeff says.
Kotzé adds that landlords should also always run credit and reference checks on any prospective tenants – with their written permission, of course – before allowing them to take occupation of any part of their property. “Even if you really need the extra income, it’s much better to turn someone with a poor credit profile or a poor payment record down at the start, than to have to go through the time consuming and costly process of evicting someone who has defaulted on their rent.”