7 ways the CPA impacts Lease Agreements

Are you looking for a CPA-compliant Lease Agreement? We have the solution for you! If you’re asking, “What is a CPA-compliant Lease Agreement?” then read on. When the CPA was initially enacted, most people homed in on the obvious impact, such as the reigning in of retailers selling defective products to customers. It didn’t take long for a new realisation to kick in: the CPA also applies to residential lease agreements! Residential leases are not limited to renting out a house. It also includes the rental of garden cottages, flats or apartments, sectional title units in complexes, and pretty much any rental of a residential property. And if the customer is a natural person, sole proprietor, or is a legal entity with an asset value or annual turnover of less than R2million (as at the date the lease was entered into), then they’re all impacted by the Consumer Protection Act. Which means a CPA-compliant lease agreement is needed. The Consumer Protection Act impacts on the following key rental agreement issues.

1. Limited duration of the lease agreement

Before the CPA there were many lease agreements that specified a duration of many years. Of course, this doesn’t allow for the old adage that “Life happens” and when circumstances required a tenant to move out four years into a six-year lease, the landlord would rub their hands in glee and claim the balance of the lease as damages. The CPA has changed all that. The CPA provides that a residential lease agreement cannot be fixed for longer than 24 months. Landlords and tenants are therefore cautioned to ensure that the duration of their contract of lease does not exceed 2 years.

2. Early cancellation of the residential rental agreement

Before the CPA came to the tenants’ rescue, a tenant was bound by the duration of the rental contract. If the lease was fixed for five years, then five years it was. Any early termination by the tenant would constitute a breach of the rental contract and open the tenant to massive legal claims. The CPA provides the tenant with an exit strategy. If a tenant wants to cancel a fixed-term lease before the termination date, the tenant can now give 20 business days’ notice of cancellation.

3. Cancellation penalties

In the pre-CPA era, if a tenant cancelled an agreement of lease early, the landlord would claim the entire balance of the lease as damages, together with a myriad of other costs. This financially crippled many a hapless tenant. The CPA now prevents this practice. While the tenant is legally entitled to cancel a fixed-term contract of lease early, this isn’t penalty-free. The CPA does provide the landlord with the right to claim a cancellation penalty. However, unlike the pre-CPA era, this cancellation penalty has been severely tempered. Cancellation penalties imposed by the landlord for early termination of the lease must be “reasonable”. The landlord must therefore be able to justify the cancellation penalty, eg. the cost of advertising for a new tenant, leasing agent’s commission, cleaning costs, and reimbursement for the time it will take the landlord to find a new tenant, during which period the rental property will stand empty. It is recommended that a (reasonable) early termination penalty is built into your contract of lease to avoid any landlord-tenant disputes later.

4. Breach clause

Before the CPA, contracts of lease commonly included very tight breach clauses. The tenant was generally given minimal time within which to remedy a breach of the lease agreement before the landlord could terminate (the most common form of breach being non-payment of the rent). The CPA now requires that before the landlord can terminate a lease based on the tenant’s breach, the landlord must have given the tenant no less than 20 business days’ written notice.

5. Notification of expiry

Before the CPA, fixed-term lease agreements would terminate automatically on the expiration date if the tenant wasn’t given an option to renew, or if the tenant failed to exercise their option. It all hinged on the rental contract wording and the landlord was not obliged to draw the tenant’s attention to any impending termination or option to renew. The CPA now requires a landlord to notify the lessee of the impending termination of the lease agreement. This notice must be delivered no more than 80 and no less than 40 business days before the expiry of the lease. This notice must advise the tenant what options are available, eg. the tenant may elect to renew, and must also specify any material changes that would apply should the agreement of lease be extended, eg. an increase in the rental payments.

6. Month-to-month

The CPA also provides the tenant further protection in that, if a contract of lease comes to an end, and provided there has been no other agreement to the contrary or the tenant has not informed the landlord of their decision, the lease agreement will automatically extend on a month-to-month basis. With a month-to-month lease agreement either party can terminate the lease by giving the other party one calendar month’s notice.

7. Plain language

Before the CPA hit the scene, the rental landscape was littered with contracts of lease that resembled ancient tomes, complete with prehistoric languages (Latin), unreadable paragraphs (fine-print), reams of incomprehensible rambling (legalese), and seemingly disjointed thought-processes (endless cross-referencing). The CPA now requires that rental contracts be written in plain language, so that the average tenant with average literacy abilities can understand the document. Many attorneys are still grappling with this requirement, which accounts for many incomprehensible lease agreements still circulating in the residential rental industry. Fortunately, our Lease Agreements are written in plain language, making them easy for landlords and tenants alike to understand their rights and obligations – without paying an arm and a leg for legal translation services! In Conclusion

• You cannot contract out of the CPA, and any provision that conflicts with the CPA will be unenforceable.
• Landlords who fail to comply with the CPA risk fines and imprisonment.
• Landlords and tenants should know their rights before entering into a contract of lease.
• Make sure you have a CPA-compliant lease agreement. Ensure that your rental contract includes the relevant CPA provisions and is in plain language and easy to understand.
• Be careful before using a rental agreement provided by your rental agent. Make sure that the CPA is complied with. It's the landlord (not the rental agent) who will be liable to the tenant if there is any non-compliance.
• Beware the “free” lease agreement! If your mother’s friend’s sister has given you a rental contract that she’s been “using for years”, or if a website has thrown in a “free lease agreement” as click-bait to improve their advertising revenue then you may want to think twice before using it. It's highgly probable that the document is not a CPA-compliant lease agreement. Your “free” agreement of lease might prove to be more expensive than you may have intended.

Do you need a CPA-compliant lease agreement? An easy and remarkably efficient solution is for you to get your Residential Lease Agreement pack through Agreements Online!

  Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.