The Consumer Protection Act & lease agreements
14/10/2011

The Consumer Protection Act came into operation on 1 April 2011. This legislation’s aim is to ensure that the consumers’ rights are favoured when doing business with someone, which includes transactions relating to immovable property.

The CPA applies to every transaction within South Africa which takes place within the ordinary course of the business of the supplier of the goods or services.

Services include rental, which entails the temporary possession of a property by a consumer. Although the CPA stipulates that rendering a service should fall within the ‘course of business’ of the supplier, it does not limit the application of the CPA to the sole business of the supplier. This means that a private lease agreement will be covered by the CPA.

The CPA does not apply to transactions where the consumer is a company, close corporation or a trust with an annual turnover or net asset value of R2M. As far as leases are concerned, the CPA does not apply to transactions between entities such as these - which means that the exemption from the application of the CPA is even wider.

A lease agreement may not exceed a period of 24 months, unless a longer period is expressly agreed to and the landlord can show a demonstateable benefit for the tenant. A tenant may cancel an agreement by giving the landlord notice of 20 business days, even if they lease agreement has not expired - without having to prove a breach of the agreement. The tenant will only be liable for rent until the date of cancellation, while the landlord may impose a reasonable cancellation penalty. Factors such as the duration initially agreed upon and the potential to find another tenant should be taken into consideration to determine such penalty.

On the expiry of a lease agreement, it will automatically continue on a month to month basis, unless the tenant expressly directs the landlord to terminate the agreement on expiry thereof or agrees to a renewal of the agreement for a further fixed term.

A lease agreement should be in plain language and a tenant’s attention should be drawn to provisions that limit the landlord’s risk, constitutes an assumption of risk or an indemnity by the tenant.

The cancellation and renewal provisions relating to lease agreements are retrospectively applicable if a lease agreement was entered into before 1 April 2011, but expires or might possibly be renewed on or after 1 April 2013. As mentioned previously, a lease agreement may not exceed 24 months in terms of the CPA. If a lease agreement was entered before 1 April 2011, which was the date when the CPA came into effect and it is for a period longer than 24 months, then the CPA will be applicable to that lease. If a lease was for instance entered into on 10 March 2011 (prior to the effective date of the CPA) and is for a period of 12 months, then the CPA will not be applicable to such lease.

It is therefore imperative that landlords ensure that lease agreements are revisited and amended where required to comply with the CPA.

For more information contact:
Roelof Grove – Partner Adams & Adams and Head of Adams & Adams Property Law Department Telephone: Direct Line - 012 432 6329, Secretary, Jennifer Carelsen: 012 432 6136.