The Consumer Protection Act 68 of 2008 (CPA) has introduced substantial reform to the legal treatment of fixed-term lease agreements in South Africa. One of the Act’s most notable impacts is its imposition of a statutory ceiling: fixed-term leases may not exceed 24 months, unless the landlord can prove that a longer term provides a clear financial advantage to the tenant.
Advance Notice Requirement
Under the CPA, landlords are obliged to notify tenants in writing of the approaching expiry of the lease agreement. This written notice must be issued no less than 40 and no more than 80 business days prior to the contract’s termination date. The notice should inform the tenant of their rights and available options, including renewal on amended terms or termination.
Auto-Renewal Clauses Under Scrutiny
A recurring issue concerns lease clauses that purport to automatically extend the contract if neither party gives notice of termination. In terms of the CPA, this type of clause does not automatically bind the tenant to another fixed-term lease. Unless the tenant actively consents to a further fixed period, the lease is presumed to continue on a month-to-month basis following its initial expiry.
Does the CPA Apply to All Landlords?
Whether the CPA applies to residential rental agreements involving private landlords remains a subject of legal interpretation. The crux lies in determining whether the landlord leases property “in the ordinary course of business.” This phrase features in the CPA’s definitions of both “consumer” and “transaction”, and was judicially considered in the case of Airport Inn and Suites (Pty) Ltd v Strydom.
The court in Airport Inn adopted an objective lens when interpreting this phrase. It held that one must consider the terms of the transaction and the context in which it was concluded, assessing whether a reasonable and solvent businessperson would typically enter into such a transaction as part of their business operations. This interpretation widens the scope of the CPA’s application to include scenarios where a landlord may not be a full-time property investor but still engages in leasing for income-generating purposes.
Temporary Letting and the CPA: The Venter Decision
A contrasting conclusion was reached in Venter and Another v Els and Another, which dealt with landlords who had relocated abroad and temporarily let out their primary residence. In this instance, the landlords were not property professionals but engineers who had moved to Australia while deciding whether to make the relocation permanent.
When the tenant sought to renew the lease, a new agreement was concluded with a clause that allowed the landlords to terminate with three months’ notice. The tenant’s legal representative argued that the CPA rendered the early termination provision invalid. However, the court disagreed. It held that the lease did not arise in the landlords’ ordinary course of business; the rental was temporary and not part of a broader commercial leasing enterprise. Thus, the cancellation clause remained enforceable.
Reconciling the Two Cases
Although the decisions in Airport Inn and Venter may appear inconsistent, the outcomes are rooted in the differing factual backgrounds. Airport Inn involved a commercial hospitality entity regularly leasing accommodation for profit, whereas Venter was based on a personal and non-recurring letting of a private home. The context and intentions of the parties were key in determining whether the CPA’s consumer protections applied.
Final Considerations
Lease agreements qualify as service contracts under the CPA. In such arrangements, tenants receive occupation rights in exchange for payment. However, the enforceability of automatic renewal clauses remains doubtful under the CPA’s pro-consumer framework, and landlords should exercise caution when incorporating them.
Ultimately, each rental scenario must be evaluated on its own merits. The applicability of the CPA, especially in private rental settings, hinges on whether the transaction can be said to form part of a landlord’s usual business conduct. Legal advice should always be sought where there is uncertainty, particularly regarding lease renewals and termination rights.
