Property Advice

The Consumer Protection Act and your lease agreement

Private Property South Africa
Alan Levy |
The Consumer Protection Act and your lease agreement

Find out how the CPA impacts on your lease agreement.

Instalment 1

The CEO of HIGH FLYERS PROPERTY yells at his in-house legal advisor JACK – Jack! What do you mean you don’t know whether the Consumer Protection Act (CPA) (which commenced on 1 April 2011) applies to our 20 000 lease agreements that we had running when the CPA started?

JACK turns pale – MR. CEO I will have to contact our lawyers to find out the answer!

One of the pivotal provisions of the CPA which appears presently to be, applicable to lease agreements is:

Section 14 - Expiry and Renewal of Fixed Agreements

Section 14 - Notably for landlords entitles a consumer to cancel an agreement by giving the supplier 20 business days notice. The supplier in this case is entitled to impose a reasonable cancellation penalty.

Section 14 - Moreover obligates the supplier between 40 and 80 days before the end of the agreement to notify the consumer of the impending expiry of the agreement and of any material changes that will apply if the agreement is renewed.

Section 14 - Significantly also provides that on expiry of the fixed term of the agreement, the agreement continues on a month to month basis.

Section 14 is unquestionably applicable to agreements (which fall within the ambit of the Act) that were concluded after the commencement of the CPA being 1 April 2011. The question being posed above is - What happens if the agreement was concluded before the commencement of the CPA being before 1 April 2011. Are the provisions of the CPA applicable to such an agreement?

To answer this question one need merely refer to the Transitional Provisions which appear at the end of the CPA and which provide in summary for the following: If the agreement was concluded before 1 April 2011 then certain parts of Section 14 are applicable to the agreement but only if the agreement provides for a fixed term which will expire on or after 1 April 2013 (2 years after the commencement of the CPA).

Therefore if the agreement provides for a fixed term which will expire on or after 1 April 2013 then the designated sections of Section 14 of the CPA will be applicable to such agreement.

Jack boldly thumps on MR CEO’s door. Vindicated, he announces: MR CEO I have the answer to your question. Here take a copy. It should make for some great reading in the golf cart this afternoon….

Instalment 2

The CEO rejuvenated after his stint on the golf course again probes Jack - So now that you’ve innovated printing attorneys articles off the internet and since you have 200 lease agreements piled on your desk to wrap up, what other sections of the Consumer Protection Act (the CPA) (which commenced on 1 April 2011) are applicable to lease agreements?

Jack attempting to evade the question finally retorts – Hmmmm, I have actually almost concluded my synopsis on these Sections. Can I pop in, in a moment to brief you on them?

Hours later Jack bursts in and spurts out – in his own words, the contents of an article he had memorized just moments before from the private property website. Well MR CEO, yesterday we conversed on Section 14 of the CPA. I’m positive I don’t have to recap all of that legal jargon about a consumer being entitled to cancel an agreement with 20 business days notice and the supplier being entitled to impose a reasonable penalty.

The next section I think you should know about is Section 22 of the CPA which prescribes that a document must be in plain language meaning that the class of person to whom the document is intended, with average literacy skills and minimal experience as a consumer could be expected to understand the content, significance and import thereof.

In terms of Section 22 - This means that the context, comprehensiveness, consistency, organisation, form and style, vocabulary, usage and sentence structure and any examples and headings need to comply with these plain language requirements. I therefore recommend that we revise our lease agreement and ensure that the full contents thereof appear in plain language as we may be obliged to do in terms of Section 22 of the CPA.

Jack explains to MR CEO that he has had a sudden memory lapse - Would it be satisfactory if I addressed you on the next applicable section of the CPA after my next dose of caffeine? It is, after all, tea time.

Instalment 3

On his caffeine high Jack confidently knocks on MR CEO’s door - MR CEO I am now ready to discuss the next applicable section of The Consumer Protection Act (THE CPA).

MR CEO SQUELCHES BACK - Y*ou better be, in 1 hour I jet off to our new development on Lake Boomerang.

Jack takes off immediately…*

Section 48 of the CPA states that - a supplier may not enter into an agreement in respect of any services at a price that is unfair, unreasonable or unjust or on terms that are unfair, unreasonable or unjust.

The Section further states that - a supplier may not require a consumer to whom services are supplied to:

• Waive any rights

• Assume any obligation

• Waive any liability that ordinarily is that of the supplier

on terms that are unfair, unreasonable or unjust. The supplier may also not impose such terms as a condition of entering into a transaction.

Section 48 continues to state that - an agreement or a term of an agreement is unfair, unreasonable or unjust if:

• It is excessively one sided in favour of any person other than the consumer or

• The terms of the agreement are so adverse to the consumer as to be inequitable.

*MR CEO I think I therefore have to check our lease agreements regarding specifically -

• Do our lease agreements provide for a consumer to waive any rights

• Do our lease agreements provide for a consumer to assume any obligations, that may not necessarily belong to him

• Do our lease agreements provide for the consumer to waive any obligations of the supplier

• Are our lease agreements excessively one sided

• Are our lease agreements adverse to the consumer

Jack, head in his hands, grumbles -* I think I have my work cut out for me. Enjoy the flight MR CEO*

Instalment 4

Jack’s curiosity gets the better of him - So MR CEO, how is the development at Lake Boomerang coming along?*

MR CEO barks at Jack - Jack lets cut to the chase - how is that research coming on the Consumer Protection Act (CPA).

Section 49 of the Consumer Protection Act (CPA) is also an important section for landlords to take note of.

Section 49 of the CPA provides that a provision of an agreement that:

• Limits the risk or liability of the supplier

• Constitutes the consumer assuming risk or liability

• Imposes an obligation on the consumer wherein he indemnifies the supplier

• Constitutes an acknowledgement of any fact by the consumer

must be drawn to the attention of the consumer and must be

• Written in plain language

• Drawn to the attention of the consumer in a conspicuous manner that is likely to attract his attention

• Be brought to his attention at an early stage as set out in the section

• The consumer must be given an adequate opportunity to receive and comprehend the provision of the agreement

Jack glares at MR CEO – Can I make a suggestion? Lets have tenants sign a pre-lease document recording any terms of our lease agreement that fall into the above category and drawing same to their attention in the manner set out above.

MR CEO to Jack - You have my blessing Jack. Prepare me a draft of our new pre-lease document*

Instalment 5

Jack proudly announces to MR CEO - I wanted to thank you for the opportunity of permitting me to explore the The Consumer Protection Act (CPA).

MR CEO to Jack - I must admit Jack you have truly impressed me, a shift up our corporate ladder is definitely in order. Can you indulge me with more information on the CPA?

Section 51 of The Consumer Protection Act (CPA) states that a supplier cannot make an agreement subject to any terms which directly or indirectly:

• Waive or deprive a consumer of a right in terms of the CPA

• Avoid a suppliers obligation or duty in terms of the CPA

• Set aside or override the effect of any provision of the CPA

Furthermore Section 51 states that an agreement cannot be subject to a term which:

• Limits or exempts the supplier from liability for any loss attributable to his gross negligence

• Constitutes an assumption of risk or liability by the consumer for such loss

• Imposes an obligation on the consumer to pay for damages

In addition, in terms of Section 51 a supplier may not make an agreement that falsely expresses an acknowledgement by the consumer that before the agreement was made, no representations or warranties were made in connection with the agreement by the supplier.

This is important because in respect of Section 51 if any term of the agreement contravenes the above that term is void.

I think there are 2 very important lessons to be learnt from this section:

• The clause that we previously had in our lease agreements that the lease agreement was the whole agreement and that no representations or warranties made not contained in the agreement would be binding, may in certain circumstances, no longer be enforceable, (as may have been the position before the CPA commenced on 1 April 2011)

• Non compliance with Section 51 can lead to a term of an agreement or the entire agreement being void and therefore not enforceable

MR CEO with a huge grin on his face - Jack, you never cease to amaze me. You know we have just opened a regional office in Dubai.....Given some thought to heading up our legal team there!

Jack, imagining the sprawling beaches and surfers paradise, retorts back – MR CEO I think I’ve got some packing to do…

Alan Levy is an attorney at Alan Levy Attorneys, which specialise in evictions, rent collections and landlord / tenant law. The views herein are not intended to be and should not be construed as legal advice. If legal advice is required, a suitably qualified attorney should be consulted with.

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