Section 14 of the Consumer Protection Act (CPA) applies to all fixed term agreements that are not entered into between two juristic persons, regardless of their asset value or annual turnover. Section 14 has had a substantial impact on Lease Agreements in that the section allows:
- the Lessee to cancel the agreement with 20 business days’ notice;
- it compels the Lessor to provide the Lessee with 20 business days to remedy breach of the agreement before the agreement can be cancelled; and
- it bars the Lessor from early cancellation of the agreement unless there is breach of a material term of the agreement.
Important to note, in this regard, is that an agreement is only governed by Section 14 the CPA if the agreement is for a fixed term. This means that the agreement is for a specified term and not on a month to month basis. However, an agreement that is governed by Section 14, will automatically continue on a month to month basis after the expiry or termination date of the lease agreement has lapsed.
Section 14 also prescribes a notice to inform the Lessee of the impending termination date of the agreement. Not less than 40 and not more than 80 business days prior to the impending expiration date, the Lessor must give notice of termination to the Lessee, should he wish the Lease to terminate on the specified termination date. If this notice is not given, or not given correctly, the agreement will not terminate on termination date but will continue on a month to month basis.
Should notice therefore not be given and the agreement not be extended for a further specified period, the continuance of the agreement on a month to month basis will not be governed by Section 14. For this reason, it is crucial to have a correctly worded breach clause. Take for example, the situation where no notice is given and the lease agreement continues on a month to month basis. Section 14 will no longer apply to the lease agreement, yet an incorrectly drafted breach clause will only take the application of Section 14 into account. Thus the Landlord, though entitled to cancel the lease agreement with only 7 calendar days’ notice in case of breach of the agreement will only able to cancel the lease agreement on 20 business days’ notice in terms of the written agreement. The Lessor will therefore be greatly prejudiced.
It is therefore highly advisable that the breach clause in an agreement, makes provision for both options; for when Section 14 applies to the agreement and when Section 14 does not. This protects the interests of the Landlord in both situations and does not prejudice or limit his rights in situations when Section 14 does not apply.
We urge you to peruse the breach clause in your lease agreement and insure that both situations have been catered for. Should your agreement not cater for both situations, start using a lease agreement that does, for instance the TPN LeasePack available on http://www.leasepack.co.za, or ask us to assist you in drafting the new clause. A Landlord must protect his interests and investment. A few days makes an enormous difference! #happryrenting.