Legislation passed in the last 10 years that has an impact on the relationship between landlord and tenant protects the tenant more than it does the landlord and doesn’t provide the landlord with the same level of certainty than it does for the tenant. It is of utmost importance that residential lease agreements comply with the requirements of current legislation as non - compliance may leave the landlord out of pocket or the landlord may be imposed with hefty penalties. If a residential lease agreement does not comply with the necessary requirements it also becomes very difficult for legal practitioners to enforce these agreements in the event of breach on the side of the tenant due to the protection that legislation affords the tenants.

Two major acts contains provisions applicable to residential lease agreements:

1) The Consumer Protection Act 68 of 2008 (the “CPA”):

a) APPLICATION

It is clear from Section 5 of this Act that the CPA is applicable to residential lease agreements.  What is less clear is whether it is applicable to ALL residential lease agreements.

Section 5 states that the CPA applies to:

- every transaction occurring within the Republic;

- the promotion of any goods of services, or of the supplier of any goods or services, within the republic.

The act also contains the following vital definitions:

- “transaction“ is defined as “in respect of a person acting in the ordinary course of business-

(i)  an agreement between or amongst that person and one or more other persons for the supply of any goods or services in exchange for consideration”.

-“ Service” is defined as the activity of providing access to or use of any premises or other property in terms of a rental.

The act does not define “in the ordinary course of business”.  In the case of Amalgamated Banks of South Africa Bpk v De Goede en ‘n ander 1997 94) SA 66 (A) it was held that the test for determining whether a contract falls within the ordinary course of business is whether the making of the contract falls within the scope of that business and whether ordinary business persons would have concluded the contract (i.e whether the contract is one with terms and conditions that ordinary business persons would use). This means that if a salary earning individual owns immovable property and lets it to increase his or her monthly income, the CPA will be applicable. The CPA will not be applicable if it is a once off transaction for instance if a teacher rents out his or her holiday home to a foreign student for the duration of the student’s visit but that teacher does not normally rent out his or her holiday home. It is also argued that it does not have to be within the ordinary course of the landlord’s business for the CPA to be applicable. Should the landlord rent his immovable out on a regular basis or has rented it out more than once, it is deemed to be within the ordinary course of business.

b) RELEVANT PROVISIONS

The following provisions of the CPA determine the content of the terms that must be included in a residential lease agreement when such an agreement is drafted:

1. If the duration of the lease agreement is a fixed term then the duration of the lease may not exceed 24 months, unless a longer period is expressly agreed to and the landlord can show a demonstrable financial benefit to the tenant in the extension (Sec 14 and Regulation 5).


2. The agreement must contain a clause stating that upon expiry, the lease agreement will automatically renew on a month – to – month basis subject only to material changes in respect of which the supplier has given notice. The CPA provides that a month – to – month renewal will apply unless the tenant expressly directs the landlord to terminate the agreement on the expiry date or agrees to a renewal for a further fixed term (Sec 14). This automatic renewal will be applicable even if the agreements states otherwise.


3. Section 22 requires that the agreement should be written and plain and understandable language and that the drafter of the agreement should expect the reader thereof to be an ordinary consumer with average literacy skills and minimal experience as a tenant.


4. The lease agreement may not include any terms that waive any rights, assume any obligation or waive the liability of the landlord.


5. Section 49 requires that the tenant’s attention must be drawn in a conspicuous manner to terms and conditions that purports to:
   • limit in any way the risk or liability of the landlord;
   • constitute an assumption of risk;
   • impose an obligation on the consumer to indemnify the landlord;
   • be an acknowledgment of any fact.>


6. Lease agreements can no longer contain a clause providing that the lease premises are leased “as is” or “voetstoots” as the CPA gives the tenant the right to receive services that are free of defects and of a quality that persons are generally entitled to expect.


7. The rental amount must be adequately displayed and the tenant must bear knowledge thereof before conclusion of the agreement and the rental amount included in the agreement may not differ from the amount initially displayed.

The following provision of the CPA regulates the conduct of both the landlord and the tenant and are only applicable to fixed term agreements:

1. The tenant may cancel the lease any time prior to the expiry date by giving 20 business days’ notice. The tenant can do this at own discretion and does not need to prove breach on the side of the landlord. In this case, the tenant remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to date of cancellation.The landlord may impose a reasonable cancellation penalty with respect to any services provided to the tenant in contemplation of the agreement enduring for its intended fixed term. (Please see regulation 5(2) for guidelines on what a reasonable penalty would entail)
   
   
2. The landlord may cancel the agreement 20 business days after giving written notice to the consumer of a material failure by the tenant to comply with the agreement, unless the tenant has rectified the failure within that time. The landlord can therefore not cancel the agreement at his own discretion but only if and when the tenant is in breach of the agreement and was given 20 business days to rectify such breach.
   
   
3. Not more than 80, nor less than 40 business days before the expiry of the agreement the landlord must notify the consumer in writing of the impending expiry date, including a notice of any material changes that would apply if the agreement is to be renewed or may otherwise continue beyond the expiry date and the options available to the consumer in terms of terminating the agreement of renewing the agreement for a further fixed term.


4. These provisions will only apply to agreements entered into after the commencement of the Act i.e 1 April 2011. However the provisions regarding renewal and cancellation apply to agreements entered into before 1 April 2011 if the lease period expires or comes up for renewal on or after 1 April 2011.


5. These provisions will not apply if the agreement is entered into between two juristic persons.

c) NON – COMPLIANCE

Non- compliance with the provisions mentioned above may result in the tenant referring the matter to any ombudsman, the consumer protection tribunal, the consumer protection commission, the consumer court or any relevant court with jurisdiction.

In any of these forums, if it is found that the treatment of the tenant was unconscionable, unjust, unfair or unreasonable, the relevant forum can make any of the following orders:

1. To restore money or property to the tenant;
2. To compensate the tenant for losses of expenses relating to the agreement or the proceedings of the court or tribunal
3. That any part of an agreement must be severed or altered to the extent required to render it lawful;
4. To declare the entire agreement void as from the date that it purportedly took effect;
5. Ordering a landlord to alter or discontinue any conduct that is inconsistent with the Act;
6. Awarding damages against a landlord for collective injury to all or a class of tenants

2) THE RENTAL HOUSING ACT 50 OF 1999

The Rental Housing Act contains provisions that must be included in lease agreements and are deemed to be terms of the agreement, whether it is agreed to in writing by the parties or not. The following provisions are important to take cognizance of:

1. The landlord must furnish the tenant with written receipts of all payments made to the landlord by the tenant;


2. The landlord may require the tenant to pay a deposit which deposit may not exceed an amount specified in the agreement or otherwise agreed to between the parties;


3. The deposit must be invested in an interest-bearing account and the landlord must pay such interest to the tenant;


4. The tenant and the landlord must jointly, before the tenant moves into the dwelling, inspect the dwelling to ascertain the existence of any defects;


5. At the expiration of the lease the landlord and the tenant must arrange a joint inspection of the dwelling with a view to ascertaining if there was any damage caused to the dwelling during the tenant’s occupation thereof;


6. The landlord may apply the deposit and interest thereon towards payment of all amounts the tenant is liable for under the said lease, including the reasonable costs of repairing damages to the dwelling. The landlord must make the receipts which indicate the costs of the repairs which the landlord occurred available for inspection by the tenant.


7. Should no amounts be due and owing to the landlord in terms of the lease, the deposit together with interest must be refunded to the tenant by the landlord within 7 days of expiration of the lease;


8. Failure by the landlord to inspect the dwelling in the presence of the tenant is deemed to be an acknowledgement by the landlord that the dwelling is in a good and proper state of repair, and the landlord will have no further claim against the tenant who must then be refunded the full deposit plus interest.


9. A list of defects as registered in terms of the inspection before the tenant moved into the dwelling must be attached as an annexure to the lease and it is the landlord’s responsibility to ensure that it is attached.

Non – compliance with the above provisions may result in the tenant referring the matter to the Rental Housing Tribunal. The Tribunal must attempt to resolve the matter by way of mediation but if it seems that it cannot be resolved the matter must be referred for hearing. After conclusion of the hearing the tribunal must make a ruling that it may consider just and fair in the circumstances. The tribunal may make a ruling as to costs as may be just and equitable, may make a mediation agreement a ruling of the tribunal and issue spoliation and attachment orders and grant interdicts. A ruling of the tribunal is deemed to be an order of a magistrate’s court in terms of the Magistrate’s Court Act. If certain provisions are contravened it will also constitute an offence and may be punished by imposing penalties or ordering imprisonment.

CONCLUSION

Landlords leasing immovable property on a regular basis must ensure that their existing lease agreement or standard lease agreements comply with the above legislation and must therefore contact their attorneys to assist them with compliance. Failure to do so will result in landlords being summoned to appear before any competent tribunal or court and unfavourable orders can be granted against them which orders may include the imposing of penalties or compensation the tenant for damages suffered or costs incurred.

REFERENCES:

1)         Consumer Protection Act 68 of 2008;

2)         The impact of the consumer protection act on leases, Lexisnexis Property Law Digest June 2011, Maryna Botha,

3)         Rental Housing Act 50 of 1999