Leases Excluded: Consumer Protection Act
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There seems to be a presumption that tenants in residential leases are protected by the Consumer Protection Act particularly where it deals with the early termination of fixed term leases and what costs may or may not be recovered by the landlord in these circumstances.
Where a lease is governed by the Act provision is made for a tenant to cancel a fixed term lease on 20 business days notice to the landlord (Sec 14 (2) (b) (i) (bb)), who may then recover a "reasonable penalty" for the early termination (Sec 14 (3) (b) (i)). Some argue that the penalty may be lost rent until another tenant is found, others argue that the penalty may only be costs incurred eg re-advertising the property to find a new tenant. Both arguments have some validity and there are few decided court cases that can help.
What is more problematic is the definitions of "transactions" and "consumers" and "rental" set out in the Act which specifically excludes those NOT in the "ordinary course of business" of the landlord.
Let's look at these exclusions:
1. A "Consumer" to which the Act applies is defined as someone to whom goods or services have been supplied in the "ordinary course of business of the supplier" - in other words if you are randomly renting out your granny flat, this would not be in your ordinary course of the landlord's business and the tenant would not be a "consumer" as defined in the Act. Renting out premises, eg a block of flats bought by the landlord as an investment to rent out, would be an example of an activity that is the "ordinary course of business" of the landlord and those leases would fall under the Act.
2. "Rental" in terms of the Consumer Protection Act is also defined as "an agreement for consideration in the ordinary course of business" (of the landlord). In other words if leasing premises is not the ordinary business of the landlord, the lease does not fall within the control of the Act.
3. "Business" is defined as the "continual marketing of any goods or services", and "business name" means the "name under which a person carries on a business". These definitions clearly exclude the incidental renting out of one's premises as that would not be in the ordinary course of the landlord's business.
Standard leases
I would therefore argue that a "standard" residential lease cannot be used as a one-size-fits-all document for all landlords. One needs to analyse first whether the circumstances giving rise to the renting of the premises is within the "ordinary course of business" of the landlord, and, if not, many of the clauses that the Act requires for the tenant's benefit can be omitted. A particularly onerous requirement of the Act is that if the tenant fails to pay rent on due date he needs to be given a 20-business day breach notice before a lease can be cancelled (Sec 14 (2) (b) (ii)). Thus a tenant may fail to pay rent and after due notice a full month of non-payment man well by before the lease can be cancelled and eviction proceedings started.
Another requirement of the Act is that when a fixed lease is expiring a tenant can wait until the last day to decide if he wants the lease to end and move out, and if he decides to stay the next day, the lease is automatically extended on a month to month basis (Sec 14 (2) (d); whereas if the landlord wants the lease to end he has to comply with the provisions of the Act to advise the tenant of renewal terms and only if the tenant declines to renew does the lease terminate (Sec 14 (2) (d) (i)).
Here is a good article dealing with this as well:
https://www.mpc.law.za/OurInsights/BlogDetail.aspx?BlogID=297
Conclusion
Make sure your landlord leases suit the circumstances of each landlord and in the interests of fairness and applying the Consumer Protection Act only where it is intended to apply, tailor your leases accordingly.
Let Mc Naught and Co help draft suitable leases and clauses to stay ahead of the tricky rental minefield, taking into account the Consumer Protection Act and it's inclusions and exclusions, as well as the Rental Housing Act and the amendments and regulations relating to leases.
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