Cancelling your lease agreement early
How do I cancel my residential lease in these uncertain times?
With the arrival of COVID19, financial obligations due to the impact on the economy became much harder to meet than ever before. Many tenants are now finding themselves in a tricky situation of not being able to afford the monthly rental costs going forward. It is important to bear in mind that when one signs a lease agreement, it creates obligations on the tenant and the landlord in respect of the relationship for the duration of the lease agreement.
What do I need to consider before terminating my lease agreement?
We firstly need to consider what the contract between the parties says, as well as consider the Rental Housing Act 50 of 1999 (the “Rental Housing Act”) for residential leases and the Consumer Protection Act 68 of 2008 (the “CPA”) (which applies to both residential and in some instances, commercial leases) in order to consider whether one may terminate his/her lease agreement.
The application of the CPA is limited to the supply of goods or the performance of services. According to the CPA, the scope of 'service' includes the provision of 'access to or use of any premises or other property in terms of a rental or any other 'right of occupancy of, or power or privilege over or in connection with any land or other immovable property'.
Which is an important provision in terms of lease agreements?
It is important to note that the CPA applies alongside with the Rental Housing Act, whlst also adhering to the contract (which may not be contrary to the CPA and the Rental Housing Act).
Early termination by lessee
In terms of section 14 of the CPA, the consumer may terminate the agreement at any earlier time by giving the lessor twenty business days’ notice in writing.
Irrespective of the reason for the termination of a fixed term agreement, the tenant will remain liable to the lessor (supplier) for any amounts owed in terms of the lease agreement up to the date of cancellation, but not up to the date the lease would have expired. Early cancellation of a lease agreement does not constitute a breach of the lease agreement, as it is a right under the CPA. A tenant therefore has the right to cancel a lease agreement but once the lessee has exercised their right to early cancellation, the lessor has the right to in turn impose a reasonable cancellation fee and claim all remaining amounts owed in terms of the lease.
Regulation 5(2) of the CPA provides that a penalty may not exceed a reasonable amount taking into account various factors such as:
· The amount that was still owing under the remainder of the period;
· The value of the transaction up until cancellation;
· The duration initially agreed upon;
· The length of notice of the cancellation;
· The potential for the landlord to find another tenant; and
· The general practice relevant to the industry
The lessor may charge the lessee for the following where a lease is terminated early: –
· Credit checks for any prospective replacement tenants;
· advertising costs; and
· in some cases, rental – the exact number of days that the unit remains vacant after the tenant vacates (depending on the contractual terms).
Only once a new tenant has been secured, can the penalty fees be determined by the lessor as all the calculations would have to be factored into the final fees so incurred by the landlord as a result of the early termination by the tenant.
As the CPA now affords consumers the right to cancel fixed term agreements, the lessor cannot undue-fully gain form a lessee’s cancellation, which would have the have the effect of negating the consumer’s right to cancel.
Lessors may only in specific circumstances also cancel the agreement with 20 business days’ notice to the tenant but on the other hand, has to provide proof of the following:
· A material failure by the lessee to comply with the provisions of the lease agreement; and
· That the lessee had been requested to remedy the breach but failed to do so and further provided that such breach is not on grounds that would be regarded as materially unfair practice.
Where there is not an instance of breach on the part of the tenant, it is important that Lessor’s are aware of their obligation to notify the tenant of the pending termination date in advance. Lessors are further now obliged to provide the lessee with a written notice of the termination of the lease when that lease coming to an end. This required notice must be sent to the lessee not more than 80 business days and not less than 40 business days before expiry of the lease between the parties.
What do I do in the event of a dispute?
It is essential that you uphold your side of the contract until it is terminated. One cannot contract out of the CPA or Rental Housing Act, or attempt to get a tenant to waive some of their rights in terms of both Acts. Do not take the law into your own hands or take unilateral action without getting legal advice. Spence Attorneys can assist with any aspects of rental disputes, rental negotiations as well as provide advice concerning any aspect of your rental. Please contact Rene Mattheus at firstname.lastname@example.org or Wendy Mvinjelwa at email@example.com for further assistance.
DISCLAIMER: This article is for information purposes only and should not be regarded as legal advice. Always seek advice from your own legal advisor. Spence Attorneys will not be held liable for any act or omission or for any person acting on any matter contained herein.