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The Consumer Protection Act No 68 of 2008 (CPA) and the Common Law: Cancellation of Lease Agreements:

Prior to the Consumer Protection Act, No 68 0f 2008 (CPA) which came into effect at midnight on the 31st March 2011; the law of contract and the common law covered the issue of when and how a tenant went about cancelling a lease agreement.

That has all now changed since the commencement date of the CPA; and tenants and landlords need to be aware of the statutory provisions of the Act; which now cover the early termination and cancellation of lease agreements.

Prior to April 2011; both parties were pretty much bound by the terms of the lease agreement and this was very much weighted in favour of landlords as opposed to their tenants.

It happens that incorrect terminology is sometimes used when leases are cancelled early.

Landlords and their agents often refer to an early cancellation of a lease agreement by the tenant as “a breach of contract.” This is not a true interpretation of the CPA.

In terms of the CPA, tenants have the RIGHT to cancel their leases, as long as they do so while fulfilling ALL the cancellation criteria or requirements.

Tenants are advised to use a legal professional to attend to this on their behalf and not to try and simply do it themselves. That could lead to complications and the landlord or agent denying that there was full compliance with the CPA. This action does not amount to “a breach of contract.” It is best described as “an early termination of lease.”

The provisions of the CPA in respect of the early termination of lease agreements applies mainly to natural persons; namely ordinary consumers; and does not normally apply to juristic persons, trusts, body corporates, companies and close corporations.

This is in line with the goal of the Consumer Protection Act as a protection for consumers and not business entities. There are however some exceptions to this general rule.

A formal legal process must be followed to make an early termination legal and effective as regards the lease agreement and more particularly so as to comply fully with the Act. It is best to get professional legal advice and assistance in giving proper notice to the landlord and/or the managing agent.

Once the landlord or his agent has received the written notice of cancellation, they should make a note of the date on which the lease is now due to end; and should start advertising immediately for a new tenant for the property. This responsibility lies squarely on the shoulders of the landlord or his agent to find a new and suitable tenant. The costs of so advertising however should also be noted, as these costs can be charged to the tenant, as part and parcel of the “reasonable penalty” that the landlord is entitled to hold the tenant responsible for; as a result of the early cancellation of their lease agreement.

Although the landlord is entitled, in terms of the Act, to hold the tenant liable for what is referred to as a “reasonable penalty” fee for early cancellation of the lease; this does not and is not meant to be used to penalise tenants; but rather is intended to allow the landlord to recoup any losses he may have suffered as a result of the early cancellation of the lease agreement; and the tenant vacating before the lease has run its course.

The costs that may be included in such a penalty would for example include the credit check costs for a prospective new tenant; and any other reasonable incidental costs relating to the new tenant and which have been reasonably incurred by the landlord in finding that replacement tenant; such as advertising costs and would also include the rental lost by the landlord if and during the period that the property was to stand vacant. It is not however a carte blanche penalty which the landlord can simply impose as he sees fit; eg 3 months’ rent.

That will not fly. It must be based on his actual financial damages. It has justifiably been described as” a penalty which cannot be charged upfront. They can only be calculated once a new tenant has been found and the landlord cannot gain financially or benefit from the tenants cancellation penalty costs. He is simply reimbursed.”

On this basis; penalty clauses in lease agreements which purport to agree a cancellation penalty in advance will simply not hold up in court.

The inconvenience for a landlord caused by an early cancellation will no doubt be both annoying and time consuming; but it is clear that a tenant has the RIGHT to cancel a lease. The landlord is only then entitled to recover his actual loses in an early cancellation penalty clause.

The CPA is however vague in that it does not define a “reasonable penalty;” and only states that a reasonable penalty may be charged for early cancellation. In practice however and in SA Law; a person who suffers damages as a result of another person’s actions is only ever entitled to recover those damages which he has actually sustained; and can prove. In practice also; it normally does not take more than a month to find another tenant.

Once again; both landlords and tenants must be aware of their rights in this regard. We hope this explanation on penalty clauses will help you to know your legal rights.

Please have a look at our website at www.legaladviceoffice.co.za for further information or send us an email to This email address is being protected from spambots. You need JavaScript enabled to view it.; and we will respond within 48 hours.

Thank you.

The Legal Advice Office Team.

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Legal Advice Office

South Africa

Kandelaar Street, Vermont, Hermanus
Phone: +27 (028) 316 2832
Email: info@legaladviceoffice.co.za

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