Tenants may be forgiven for thinking that they have every right to pack up and move on as they see fit, thanks to a clause in the Consumer Protection Act (CPA). However, landlords do enjoy a certain amount of protection and the tenant can legally be held liable for a number of costs.
The Consumer Protection Act states that a consumer may cancel an agreement as long as they give 20 business days’ notice in writing. This seems to apply to a lease agreement, but be warned; the consumer can still be held liable for a cancellation penalty.
Alan Levy from Alan Levy Attorneys says there seems to be a general misconception amongst tenants that they are entitled to give 20 business days’ notice of cancellation of a lease without any financial repercussions. This is simply not true and in terms of property rentals this can become an expensive exercise for an unsuspecting tenant who believes that there will be no financial obligations once he has exercised his rights.
“The 20 business day notice period that a tenant can now give will not absolve the tenant of all responsibility,” says Levy. He says that the tenant will still be liable to the landlord for reasonable cancellation costs as a result of the early cancellation of the lease by the tenant.
While a landlord may not rack up the charges so to speak, it is up to him to decide what constitutes a reasonable amount, if this not dealt with in the lease agreement. “Should the tenant dispute the reasonableness thereof, then the Court will have to decide whether the cancellation costs are indeed reasonable.”
Tenants should consider thinking like a landlord before they exercise their right to cancel. For example, property rentals have generally worked on a calendar month cycle, and will probably continue to do so for the sake of convenience, despite the ability to give 20 days’ notice under the CPA. For instance, you move in on the 1st of a month and you vacate at the end of a month. This works well for all concerned as it gives the landlord a full month to find a suitable tenant. However, if notice is given during the month, it is going to be far harder to secure a new tenant who is willing and able to move in, considering that he himself will more than likely be locked into his own lease until the end of that particular month.
In cases such as these, a landlord may charge the previous tenant an additional month’s rent to cover his losses. It doesn’t stop there. A landlord may also charge for cleaning the property, re-advertising the property, as well as the agent’s costs involved in securing a new tenant for the property. The biggest danger for the tenant, however, is if the landlord fails to find a tenant when the existing tenant moves out.
“The tenant could also be liable for rental for the period that it takes the landlord to procure a new tenant for the premises, although this would also have to be a reasonable amount,” says Levy.
In theory, this means that a landlord would be quite within his rights if, despite all his efforts he failed to secure a new tenant, to hold the previous tenant liable for the full rental on the property. Paying an equivalent of two months’ rent is out of reach for most, but what would happen in the case where the landlord failed to secure a tenant for a three month period?
This particular aspect of the CPA has not yet been tested in a court of law. However, the general consensus is that although a landlord may not penalise the tenant and force him to pay rental for the entire time that the initial lease agreement would have run, he could be well within his rights to insist that the tenant continues paying rent until a new tenant has been found, albeit within the bounds of reasonableness. As stated, what is reasonable will have to be tested in court.
The message is clear: exercise your right to cancel by all means, but remember that you could be the one who is out of pocket at the end of the day. By opening the doors of communication with your landlord, discussing the issue and trying to reach a compromise may well save you a great deal of financial stress, litigation and inconvenience.