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time termination of lease

Get insight into both the Common & Consumer Law before terminating a commercial lease agreement earlier

 When one has an issue with a commercial lease agreement and especially where one wants to terminate the agreement early one has to have insight into both the Common Law and Consumer Law.

 During the course of this month, we intend concentration on this aspect of consumer and commercial law.

The Consumer Protection Act No 68 of 2008 (CPA):

In the above context and as per our opening statement above; there are two important aspects of the CPA which need to be applied.

 Section 14:

 The Expiry and renewal of fixed terms contracts are dealt with in section 14 of the CPA.

 It is vitally important that both landlords and tenants are aware of the detail set out in this section when it comes to lease agreements

 but these provisions apply equally to all fixed-term contracts.

The most important aspects are section 14 itself in its entirety and then also regulation 5.

As a result, I intend quoting them both in full and in our next few blogs discussing each in detail.

Section 14 reads as follows:

 “(1) This section does not apply to transactions between juristic persons regardless of their annual turnover or asset value.

(2) If a consumer agreement is for a fixed term—

                (a) that term must not exceed the maximum period, if any, prescribed in terms of subsection (4) with respect to that category of consumer agreement;

                (b) despite any provision of the consumer agreement to the contrary—

                (i) the consumer may cancel that agreement—

                (aa) upon the expiry of its fixed term, without penalty or charge, but subject to subsection (3) (a); or

                (bb) at any other time, by giving the supplier 20 business days’ notice in writing or other recorded manner and form, subject to subsection                  (3) (a) and (b); or

                (ii) the supplier may cancel the agreement 20 business days after giving written notice to the consumer of a material failure by the consumer to comply with the agreement, unless the consumer has rectified the failure within that time;

                 (c) of not more than 80, nor less than 40, business days before the expiry date of the fixed term of the consumer agreement, the supplier must notify the consumer in writing or any other recordable form, of the impending expiry date, including a notice of—

                (i) any material changes that would apply if the agreement is to be renewed or may otherwise continue beyond the expiry date; and

                 (ii) the options available to the consumer in terms of paragraph (d); and

                (d) on the expiry of the fixed term of the consumer agreement, it will be automatically continued on a month-to-month basis, subject to any material changes of which the supplier has given notice, as contemplated in paragraph (c), unless the consumer expressly—

                (i) directs the supplier to terminate the agreement on the expiry date; or

                (ii) agrees to a renewal of the agreement for a further fixed term.

(3) Upon cancellation of a consumer agreement as contemplated in subsection (1)(b)

                (a) the consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to the date of cancellation; and

(b) the supplier—

              (i) may impose a reasonable cancellation penalty with respect to any goods supplied, services provided, or discounts granted, to the consumer in contemplation of the agreement enduring for its intended fixed term, if any; and

                (ii) must credit the consumer with any amount that remains the property of the consumer as of the date of cancellation, as prescribed in terms of subsection (4).

(4) The Minister may, by notice in the Gazette, prescribe—

                (a)  the maximum duration for fixed-term consumer agreements, generally, or for specified categories of such agreements;

                (b) the manner and form of providing notices to the consumer in terms of subsection (2) (c);

                (c) the manner, form and basis for determining the reasonableness of credits and charges contemplated in subsection (3); and

                 (d) other incidental matters as required to provide for the proper administration of this section.”

That is the full detail and content of section 14.

  Regulation 5 reads as follows and must be read together with section 14 of the CPA.

  Maximum duration for fixed-term consumer agreements

(1) For purposes of section 14(4) (a) of the Act, the maximum period of a fixed-term consumer agreement is 24 months from the date of signature by the consumer—

                 (a) Unless such longer period is expressly agreed with the consumer and the supplier can show a demonstrable financial benefit to the consumer;

                 (b) unless differently provided for by regulation in respect of a specific type of agreement, type of consumer, sector or industry; or

                 (c) as provided for in an industry code contemplated in section 82 of the Act in respect of specific type of agreement, type of consumer, sector or industry.

(2) For purposes of section 14(3), a reasonable credit or charge as contemplated in section 14(4)(c) may not exceed a reasonable amount, taking into account—

                 (a) the amount which the consumer is still liable for to the supplier up to the date of cancellation;

                 (b)  the value of the transaction up to cancellation;

                 (c)  the value of the goods which will remain in the possession of the consumer after cancellation;

                 (d) the value of the goods that are returned to the supplier;

                 (e) the duration of the consumer agreement as initially agreed;

                 (f)  losses suffered or benefits accrued by the consumer as a result of the consumer entering into the   consumer agreement;

                 (g) the nature of the goods or services that were reserved or booked;

                 (h) the length of notice of cancellation provided by the consumer;

                 (i) the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation; and

                 (j) the general practice of the relevant industry.

(3) Notwithstanding sub-regulation (2) above, the supplier may not charge a charge which would have the effect of negating the consumer’s right to cancel a fixed term consumer agreement as afforded to the consumer by the Act.

The above is the whole of regulation 5 and again must be read in conjunction with section 14 above.

 

In our next blog, we will start to look at the interpretation of this important section and regulation in relation to the termination of lease agreements.

You need expertise and advice in dealing with these legal issues.

Please visit our website at www.legaladviceoffice.co.za or send us an email to This email address is being protected from spambots. You need JavaScript enabled to view it. and we will respond to your legal queries within 48 hours.

About our author:

Hugh Pollard (Legal Consultant), has a BA LLB and 42 years’ experience in the legal field. 22 years as a practicing attorney and conveyancer; and 20 years as a Legal Consultant.

082-0932304 (Hugh’s Cell Number)

This email address is being protected from spambots. You need JavaScript enabled to view it.

www.legaladviceoffice.co.za

 

 

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