How the CPA Impacts Lease Agreements – Part I

When it comes to discussing the effect of the CPA on lease agreements, there are, broadly-speaking, three types of people:

Camp 1: Those who know exactly what I’m talking about, could probably write a thesis on the subject, and will in all likelihood stop reading at this very point. (But before you do, I just want to thank you for taking the time to read my ponderings – I really hope my previous newsletters have been of interest to you.)

Camp 2: Those who sort of, kind of, think they, like, you know, know what I’m talking about. Just enough to nod sagely when the small-talk around the braai shifts to the horror tenant / landlord your host is currently doing battle with. But if you find the prospect of coming face-to-face with a lease agreement that you personally need to sign slightly more daunting, hopefully this blog will shed a little light on the subject.

Camp 3: And then there are those who go “CP-what? Is this some kind of new political party?”

The CPA explained

For the benefit of those in Camp 3 (Camp 2 readers, please bear with me here): CPA is a TLA for Consumer Protection Act. This Act came into effect on 1 April 2011, so it has been around for a while now. But we are still receiving a lot of queries about it, hence the topic for discussion. In a nutshell, the Act is South Africa’s first comprehensive legislation which, as the name suggests, seeks to protect consumers’ interests in the marketplace. It is designed to address the historical power imbalance between consumers and providers by strengthening consumers’ rights in their dealings with providers. In particular, the preamble of the Act provides, amongst other things, that “it is desirable to promote an economic environment that supports and strengthens a culture of consumer rights and responsibilities, business innovation and enhanced performance”, and accordingly the Act has been promulgated to “promote and protect the economic interests of consumers.”

The Consumer Protection Act applies to all “transactions” save for those that have been expressly excluded. For example, the CPA does not cover transactions involving consumers above the regulated size (R2 million) in terms of asset value or annual turnover; government departments; or where the agreement falls under the National Credit Act.

The term “transaction” is defined as “an agreement … for the supply or potential supply of goods or services in exchange for consideration … or for performance of … any services for or at the direction of a consumer for consideration.”

The term “consideration” means anything of value given and accepted in exchange for goods or services, including

  • money, property, a cheque or other negotiable instrument, a token, a ticket, electronic credit, credit, debit or electronic chip or similar object;
  • labour, barter or other goods or services;
  • loyalty credit or award, coupon or other right to assert a claim; or
  • any other thing, undertaking, promise, agreement or assurance, irrespective of its apparent or intrinsic value, or whether it is transferred directly or indirectly, or involves only the supplier and consumer or other parties in addition to the supplier and consumer.

In English: any supply of goods and services by a supplier within the ordinary course of business, in return for some form of remuneration, is covered by the CPA, unless it has been expressly excluded by our law-makers.

CPA and Lease Agreements

What caused some consternation in the property industry at the time was the realisation that the CPA doesn’t just impact a typical sale of goods and services transaction. It also affects the relationship between landlord and tenant. Reason being, renting a property out for a tenant’s use, technically, constitutes the provision of goods and services. Accordingly, contracts of lease fall under the protection of the CPA.

Now that our Camp 3 readers have been promoted to Camp 2, we can delve into a bit more detail. How, exactly, does the CPA impact upon lease agreements?

Let us rephrase that a bit. Are there any lease agreements that are not impacted by the CPA? The simple answer is: yes.

Stay tuned for our next installment to find out more.

To Be Continued…..

In Summary: When entering a Lease Agreement, consider whether the Consumer Protection Act applies.

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.