The South African Property Owners Association (SAPOA) has raised concerns regarding section 14 of the Consumer Protection Act. This section of the CPA deals with the duration and cancellation of fixed term agreements, such as lease agreements.
The Minister has set the maximum duration of a fixed term contract at 24 months and a consumer may cancel that contract at any time subject to 20 business days’ notice.
In respect of duration, SAPOA has argued that banks will not give credit to a consumer to start up a business if the lease agreement is limited to a two year period and they have further argued that on this basis, this provision should not apply to property leases. It must however be noted that this issue was addressed by regulation 5(1)(a) which proved that the maximum period will be 24 months unless “such longer period is expressly agreed with the consumer and the supplier can show a demonstrable benefit to the consumer.” Thus, if a consumer can obtain credit to start a business by extending the term of his lease, he will be allowed to do so.
In the event that the lessee, for whatever reason, needs to leave the above premises, then he must give the lessor 20 business days’ notice. The SAPO has raised concerns about this short notice period. In most lease agreements the Lessor will include a clause that the agreement can be cancelled by the lessor on a month’s notice. This clause was traditionally included to protect Lessors from errant Lessees. The CPA however levels the playing field. In the event that there are no public holidays to take into consideration the 20 business days would only be two days short of a calendar month’s notice.
In addition to the consumer will remain liable to the lessor for any amounts owed up to the date of cancellation. Lessors are further entitled to charge a reasonable early cancellation “penalty” fee. In accordance with regulation 5(3) the fee charged cannot be such that it negates the Lessee’s right to cancel the Agreement. As such it can be argued that Lessors are in no worse position than before the CPA, but the Lessee’s position has improved.
Ian Mc Laren