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7

The Consumer Protection Act and lease agreements

30th November 2011

By: Creamer Media Reporter

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The Consumer Protection Act 68 of 2008 (the “CPA”) has been in effect since 1 May 2011 and has been the source of much debate. In terms of its relevance to lease agreements, the Landlord is deemed the supplier and the tenant the consumer. The act of supplying immovable property for rental to the consumer is where the confusion lies as some academics believe this to be “goods” and others, “services”. Section 1 of the definition of “goods” includes “a legal interest on land or any other immovable property; other than an interest that falls within the definition of ‘service’ in this section”. The definition of “services” includes the provision of “access to or use of any premises or other property in terms of a rental.” The definitions therefore both provide for lease agreements.

The area of the lease agreements that has been most affected is the duration, expiry and renewal of the agreement.

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Expiry and Renewal:

Section 14 of the CPA makes provision for the expiry and renewal of lease agreements. The fixed term contract (lease agreement) may not exceed a maximum period as prescribed by the Minister which currently provides for 24 months. The CPA states that despite ANY other provision to the contrary, the consumer/tenant may cancel the agreement in any of the following instances: upon expiry of the term, without any penalty or charge subject to the rental being up to date; or at any time by providing 20 (twenty) business days notice in writing. On cancellation of the lease agreement, the tenant remains liable for any rental payable up to the date of cancellation and further, the landlord may impose a “reasonable cancellation penalty” in contemplation of the lease enduring for its intended fixed term.

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A monthly tenancy continues after expiry of the lease agreement unless the landlord initiates a material change to the lease agreement and the consumer can elect to stay on or vacate after expiry.

Should the consumer/tenant materially fail to comply with the agreement, the supplier/landlord may cancel the agreement with 20 (twenty) business days notice unless the consumer/tenant has rectified the failure. On cancellation, the consumer/tenant remains liable for the rent payable up to the date of cancellation and the landlord is entitled to impose a reasonable cancellation penalty. The landlord cannot claim specific performance.

The CPA does not apply to, among other instances, those involving the State, once off leases, those agreements in terms of the National Credit Act as well as to instances where both parties are juristic persons, which in terms of the CPA includes a body corporate; partnership or association; or trust for purposes of this CPA. Does this then leave a loop hole where the supplier will demand that the consumer register a company in order to become a juristic person exempt from the CPA?

We hope the above is of interest to you.

Written and prepared by
Lauren Hastie
BOUWER KOBELI MORABE

Please do not hesitate to contact us on +27 11 788-0083 should you have any further enquiries or email enquiries@bkm.co.za.
 

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