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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2018-03-23

The question of how the Consumer Protection Act (CPA) affects the property rental industry has been a much debated subject within legal circles and players within the industry.

The concepts introduced by the CPA are that there are services (such as estate agency services offered to a property owner) or rental services from the property owner to a tenant in terms of a lease agreement. A supplier is defined as a person who markets any good or service and a consumer is that person who has entered into a transaction with a supplier. A Landlord therefore has protection in terms of the CPA in his relationship with the estate agent and the mandate provided under certain circumstances.

If the Landlord is a natural person then the CPA applies. If the Landlord is a juristic entity with asset value or turnover of less than R2m per annum then the CPA applies but not Section 14 (i.e. limited application). In a nutshell the CPA therefore affords protection mostly to natural persons.

The material aspect of this is that a Landlord can cancel an estate agents mandate with 20 business days notice. The tenant on the other hand is a consumer and also afforded certain protection in terms of the CPA under certain circumstances. The CPA either applies / does not apply depending on the entity entering into the service as the consumer.

For a Landlord engaging in a residential lease with a natural person as tenant there are specific aspects to be aware of. Section 8 prohibits the use of discriminatory marketing by excluding certain people from accessing the service offered, or charging certain people a different price for the same service. This does not however prevent the Landlord from performing credit or affordability assessments on the prospective tenant, or asking for a higher deposit based on the outcome of the credit report.

The expiry and renewal of fixed term contracts (such as leases) are dealt with in Section 14 of the CPA and do have some important aspects for Landlord's to be aware of. The maximum length of a lease agreement is provided as 24 months unless a longer period is expressly agreed and the Landlord can demonstrate financial benefit to the tenant. A tenant may cancel the lease agreement at any time during the fixed term by giving 20 business days notice. However a reasonable cancelation penalty may be charged.

A tenant enjoying the protection of the CPA has to be provided a 20 business day notice period in the event of a material breach of the agreement, such as not paying rental, to remedy the breach or have the lease agreement cancelled.

Another important provision is that a Landlord is obliged to contact the tenant between 40 to 80 business days before the expiry of the lease to notify the tenant in writing that the lease is about to expire and to provide the terms under which a renewal of the lease can be entered into.