Landlords- Consumer Protection Act allows early lease cancellation

The new Consumer Protection Act (CPA) allows tenants the right to give the landlord 20 days notice regardless of the lease agreement that was originally negotiated and to restrict the length of a property lease.

The South African Property Owners’ Association (Sapoa) has asked the Department of Trade and Industry to clarify certain sections of the Act.

The Association’s chief executive Neil Gopal says that the organisation is particularly concerned by section 14 of the Act, which appears to ease the hold that fixed-term contracts have on consumers.

Gopal says that limitations on other forms of fixed-term contracts – with a gym or a cell phone company – may find the relaxation beneficial but the property sector should not be exposed to cancellations of just 20 business days even though a lease might last for a year or more.

In terms of the new law, lease agreements can run for a maximum of 24 months and, once that period has passed, will continue on a month-to-month basis unless a new lease was signed.

Gopal says this creates much uncertainty for property owners – particularly those letting industrial, retail or office space – because leases in this sector were usually for considerably longer periods than two years.

“It will create a lot of uncertainty in the property market,” Gopal says.

He says that Sapoa is also concerned about the section of the Act that makes the landlord responsible for ensuring that the tenant fully understands the contents and implications of the lease agreement that is being signed.  

He warns that tenants will say that they “did not understand” the stipulations contained in the lease agreement and consequently wish to cancel it.

Gopal has suggested that landlords should insist that the tenant should warrant that he or she fully understand the contents of the lease agreement by writing and signing an acceptance letter.

Sapoa has warned landlords that they should insist that tenants accept the conditions of the lease and that they accept these conditions as they are. The changes to the Companies Act apply from 1 April this year do not affect existing lease agreements signed prior to that date.