COVID19, Early Cancellations and the CPA: Landlord vs Tenant.
In 2020 it seemed to South Africans that the world changed overnight as the Covid-19 pandemic became a reality, bringing about what may well be the hardest, most unexpected blow our economy has ever experienced. For the first time in our lives we found ourselves in a National State of Disaster in the midst of a global pandemic.
As government instituted the strictest of laws confining people to their homes and closing many businesses for months, financial systems hit an all-time low, causing already high unemployment rates to escalate beyond all expectations and leaving many tenants unable to fulfill their rental obligations towards landlords. As the situation became worse, increasing numbers of people found themselves deeper and deeper in arrears on their rental payments while landlords were carrying the costs.
With strict regulations imposed by the lockdown, social media became one of very few forms of interpersonal activity for many people in isolation. Consequently the spread of fake news spiralled into a pandemic of its own. This led to the belief they were within their rights to simply not pay rent if they were unable to earn a living because of the lockdown – and landlords had no right to take action against them due to the National State of Disaster.
The Consumer Protection Act (CPA) was referred to as a backup to this theory and word on the street was that tenants could cancel their leases without paying any outstanding rent, as well as no obligation to continue the full term of the lease.
What does the CPA say?
Section 14 of the CPA states that the consumer (in this case the tenant) may cancel the agreement “despite any provision of the consumer agreement to the contrary”. Therefore, the tenant can cancel a lease agreement even if an early cancellation is stipulated as not allowed within the lease agreement. However, the tenant can only cancel the lease agreement on the expiry date of the 20 business day notice period that must be given by the tenant to the landlord of such an early cancellation.
What is the difference between the Notice Period and The Expiry Date?
According to the CPA, the tenant must give the landlord 20 business days’ notice that they will be canceling the lease agreement. This means if the tenant is giving one month’s notice of cancellation, beginning for example, on 1 January and ending 31 January, the notice period referred to is 1-31 January. So the expiry date of the notice period will be 1 February. It is important to note the manner in which notice of cancellation must be given by the tenant must be made clear within the lease agreement. For example if written notice is required then it must be clearly stated. Don’t forget that a verbal communication, text message, etc. will not stand as notification of cancellation, unless the lease agreement specifically allows for this.
Does early cancellation release the tenant from the obligation to pay rent?
No, it does not! The tenant is still obligated to pay rent for both the notice period, as well as all outstanding rental monies that have accrued until the date of expiry of this notice period. Regardless of the CPA, the tenant has no right to refuse to pay any rental owed to the landlord, nor does the tenant have the right to refuse to pay any cancellation penalties.
Landlords are well within their rights to claim both outstanding rent and any “damages” they have suffered as a result of the tenant canceling the lease agreement before the agreed expiry date.
Such “damages” include:
- Any “discount” that the landlord offered the tenant as part of the lease agreement. This means if the lease agreement stipulates a reduction in the rental amount will be granted, should the tenant conclude a five-year lease agreement, then the landlord has the right to claim back the balance of that discount.
- Any damages that the landlord may suffer resulting from the mandate agreement with the rental agent.
- The landlord may utilise the tenant’s deposit to cover these damages.
Why are the contents of a lease agreement so important?
Should a situation such as this end up in court, the first thing the courts will do is look at the lease agreement prior to handing down judgment in the case. This is where the lease agreement included in the TPN LeasePack will provide a watertight solution. Section 21 of this agreement clearly states that payment of outstanding rent and any damages due to the landlord are enforceable by law, regardless of the state of the economy, or the tenant’s financial situation.
For more detail on the content of this article, please follow this link to a full training webinar on the eviction process. https://youtu.be/514wZv3hs_o