THE EFFECT OF SECTION 14 OF THE CONSUMER PROTECTION ACT ON FIXED TERM RENTAL AGREEMENTS

ADMINISTERING OF AN ESTATE
June 20, 2016
TALKING TO “LOR”
July 25, 2016

A1_bThe Consumer Protection Act 68 of 2008 (CPA) has considerably impacted on the rental property market since its commencement on 31 March 2011. More precisely, section 14 of the CPA has had an effect on fixed term rental agreements. Section 14, however, is not relevant to fixed term lease agreements which have been entered into between juristic persons, regardless of their asset value or annual turnover. Further, section 14 will only be applicable to lease agreements which have been entered into for a fixed term – this means that section 14 will be applicable to many, if not the majority of lease agreements relating to immovable property. As the CPA only relates to  agreements, lease agreements which have been entered into on a month-to-month basis would unfortunately not fall within the ambit of this section.

The Act does not differentiate between leases for residential, commercial, retail or industrial properties; in actual fact the Act does not discuss lease agreements for immovable property as such. It is clear from the definitions and purpose of the Act, however, that it was intended for lease agreements to fall within the ambit of the Act. The nature of the transaction between the lessor and lessee calls for regulation and protection thereof; consequently sensible to assume that it was intended for the section to apply to all lease agreements irrespective of the property type.

Section 14(2)(b) of the CPA reads “despite the provisions of the consumer agreement to the contrary – the supplier may cancel the agreement 20 business days after giving written notice to the consumer of a material failure by the consumer to comply with the agreement, unless the consumer has rectified the failure within that time.”

The lessor will thus not be in a position to cancel the lease agreement during the subsistence of the lease agreement, unless the lessee is in breach of a material term of the agreement and fails to remedy such breach within the permitted period after having received written notice to that effect. This means, should the lessor wish to take occupation of the property, or sell same, he will not be permitted to cancel the agreement.

Should the lessee be in breach of a material term of the agreement, and the lessor wishes to cancel the agreement, the lessor needs to give the lessee written notice, describing such breach and allowing the lessee 20 business days to remedy same. Further, the lessor should set out in the notice that should the lessee fail to remedy the breach within the stipulated time, the consequence will be cancellation of the agreement.

The CPA has a considerable impact in fixed-term lease agreements. It is vital for property owners to be conscious of the effect of this Act so that they may comply with it and set measures in place to mitigate the potential burden placed on property owners by the Act.

Compiled by: Laura Ames

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)