Act puts land­lords un­der fire

De­mand­ing lease con­di­tions largely aimed at pro­vid­ing ma­jor pro­tec­tion for ten­ants

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - DANELLE COR­BETT

WHILE the im­pact of the Con­sumer Pro­tec­tion Act on the man­u­fac­tur­ing, sup­ply and dis­tri­bu­tion of goods and ser­vices is clear, its ef­fect on land­lords and leases of im­mov­able prop­erty re­quires scrutiny.

Ac­cord­ing to the def­i­ni­tions of the Con­sumer Pro­tec­tion Act, land­lords, rental agents and buy-to-let in­vestors can be seen as sup­pli­ers and ten­ants as con­sumers, both sub­ject to the pro­vi­sions of the leg­is­la­tion.

The Con­sumer Pro­tec­tion Act re­lates specif­i­cally to a land­lord that lets premises as part of his or­di­nary busi­ness, as op­posed to a lease ar­range­ment in a once-off pri­vate sit­u­a­tion.

While the act will have lim­ited ap­pli­ca­tion ret­ro­spec­tively, stan­dard lease con­tracts must be re­viewed and ad­justed to com­ply with the pro­vi­sions of the leg­is­la­tion as there will be no mercy for any land­lord whose house is not in or­der af­ter the in­cep­tion date.

The pro­tec­tion of­fered to con­sumers by the act does not ap­ply to all con­sumers. For ex­am­ple, the pro­vi­sions of the act will not ap­ply to any trans­ac­tion in terms of which the con­sumer is a ju­ris­tic per­son — an en­tity other than a nat­u­ral per­son such as a com­pany — whose as­set value or an­nual turnover, at the time of the trans­ac­tion, equals or ex­ceeds R2m.

How­ever, in terms of prop­erty rentals, a con­sumer as de­fined in the act in­cludes not only in­di­vid­u­als in re­spect of res­i­den­tial leases, but also ten­ants of com­mer­cial prop­er­ties such as small or medium busi­ness en­ter­prises, where the Con­sumer Pro­tec­tion Act has oner­ous im­pli­ca­tions.

One of the most se­ri­ous chal­lenges to the se­cu­rity of ten­ancy nor­mally cre­ated by long-term leases is that ac­cord­ing to the act ten­ants may now pro­vide 20 days’ no­tice of can­cel­la­tion, de­spite any pro­vi­sion in the lease to the con­trary. How­ever, this pro­vi­sion is not ap­pli­ca­ble to leases in­volv­ing ju­ris­tic per­sons, re­gard­less of their an­nual turnover or as­set value.

While the ten­ant will re­main li­able to the land­lord for amounts owed in terms of the lease up to the date of

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