As we get closer to the end of the year we hear estate agents say increasingly that rentals are becoming the preferred choice. Thus, we decided to have a look at what the Consumer Protection Act 68 of 2008, says in this regard.
The Act provides that fixed-term consumer agreements must not exceed a certain maximum period. The current set of draft regulations prescribe this maximum period as a period of 24 months.
Section 14, which deals with expiry and renewal of fixed term agreements, confirms that it applies only to individuals and not juristic persons, i.e. companies or entities. There is currently some uncertainty as to whether an individual landlord who, lets premises to another, in addition to his main business, that is not in the course and scope of business, falls within the definition of ‘service provider’ or 'supplier’ in order for the Act to apply. It appears that such transactions do fall under the provisions of the CPA if the activity occurs on a continuous basis, and is not once-off as not to constitute a constant activity.
Section 14(1), states that, a consumer may cancel a lease or other fixed term agreement before its expiry, by giving 20 business days' written notice to the supplier. It seems that the consumer need not provide any reason for the cancellation. The Act also provides for the supplier's/landlord’s right to cancel prior to the expiry of the fixed-term agreement, but this right may only be exercised if the consumer/tenant has failed to remedy a material breach on his part, after having been placed on terms to do so. The supplier/landlord would be entitled to a reasonable cancellation penalty.
There is, however, no guidance as to what ‘reasonable’ may entail. Clearly this provision favours the consumer/tenant more and this in turn means that suppliers and landlords are exposed in that they will have uncertainty in their agreements and leases. This section also clearly flies in the face of the legal principal which states that people should be bound to the contracts they sign.
The Act provides that fixed-term consumer agreements must not exceed a certain maximum period. The current set of draft regulations prescribe this maximum period as a period of 24 months.
Section 14, which deals with expiry and renewal of fixed term agreements, confirms that it applies only to individuals and not juristic persons, i.e. companies or entities. There is currently some uncertainty as to whether an individual landlord who, lets premises to another, in addition to his main business, that is not in the course and scope of business, falls within the definition of ‘service provider’ or 'supplier’ in order for the Act to apply. It appears that such transactions do fall under the provisions of the CPA if the activity occurs on a continuous basis, and is not once-off as not to constitute a constant activity.
Section 14(1), states that, a consumer may cancel a lease or other fixed term agreement before its expiry, by giving 20 business days' written notice to the supplier. It seems that the consumer need not provide any reason for the cancellation. The Act also provides for the supplier's/landlord’s right to cancel prior to the expiry of the fixed-term agreement, but this right may only be exercised if the consumer/tenant has failed to remedy a material breach on his part, after having been placed on terms to do so. The supplier/landlord would be entitled to a reasonable cancellation penalty.
There is, however, no guidance as to what ‘reasonable’ may entail. Clearly this provision favours the consumer/tenant more and this in turn means that suppliers and landlords are exposed in that they will have uncertainty in their agreements and leases. This section also clearly flies in the face of the legal principal which states that people should be bound to the contracts they sign.
Suppliers/landlords will have to be extra careful and will have to add in a safety clause for their protection in their fixed term agreements, minimizing their exposure on the one side and not violating the provisions of the Consumer Protection Act, on the other.
For further information in this regard, please contact allison@riviganpg.co.za.
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