Introduction
The matter dealt with a fixed lease agreement (“the agreement”) between the Lessor and Lessee for a residential property. The parties entered into the agreement for the monthly rental in the amount of R 14 000.00 for occupancy of the Lessor’s residential property. The fixed period of the agreement was for 1 calendar year.
Cancellation of a fixed agreement
The applicability of the Consumer Protection Act 68 of 2008 (“CPA”) vested in the definition of consumer, as this determination provides cover for a lessee. This definition was found in section 1 of the CPA, where it states “A person who enters into the transaction with the seller in the ordinary course of supplier’s business, unless such a transaction is exempt from application of the CPA.” It further covers that a consumer can be a juristic person.
The limitation of protection rested in the annual turnover or assets are beyond the monetary threshold set by the Minister of Trade and Development, which is currently R 2 000 000.00. (as stipulated GG no. 293 of 1 April 2011).
The manner in which this agreement was structured included no breach period to remedy by either party. The CPA can affect such lease agreement as the Lessee was a juristic person, specifically section 14 of such act. The agreement was breached by the Lessee, as it failed to make timeous payments to the Lessor. A breach of any fixed agreement would raise a cancellation of the fixed agreement and that would require a party to consider the other party’s rights.
The key factor of section 14 which stipulates that a party is entitled to 20 business days in order to remedy breach of a fixed agreement. The agreement did not cover the provisions set out in the Consumer Protection Act. Although, the agreement included a residential property and the Lessor being a natural person. It was necessary to cover all possible defences imposed by the CPA.
A “lawful” cancellation of an agreement should set out the basis of a successful action or application for the Lessor should breaches and defaults be pursuant. A section 14 defence may open the door to a lengthy litigation process.
There has been much debate amongst the fairness of section 14 as it can be seen prejudicial to the supplier in respect of natural persons involved in such transactions.
Other Acts, Case Law and Common Law Applicable
Plumbago Financial Services (Pty) Ltd T/A Toshiba Rentals v Janap Joseph T/Project Finance, the parties entered into a lease agreement of 5 years and the lessee failed to pay monthly instalments and the court held that, had the lessee not defaulted, the lessor would not have suffered damages. Thereafter the lessee had to compensate the lessor. The question bear how can the supplier (lessor) be prejudiced as a result of lessee’s right to section 14 of the CPA.
Common law does govern any transactions which falls outside the scope of the CPA.
Specifically Caveat Subscriptor, whereby a party is presumed to have read the contents of the
agreement and is aware of the terms and had the intention of entering into the contract which is binding. Thus, any persons (inclusive of juristic persons) should be held liable for the contract that is entered into. It appears that the CPA allows parties to accept contractual obligations and negatively impacts suppliers in this regard.
Conclusion
Therefore, any fixed agreement by which any party wishes to cancel based on a breach should include a 20 business day period in which to remedy the breach accordingly. Such tactic would safeguard your client from future legal implications as most residential lease agreements do not cater for the CPA. It may be seen that this approach may be overlooked as the CPA does not stipulate specifically in respect of the parties involved. However, any matter similar to the above could be locked in a litigation battle and the client may suffer further unnecessary legal costs.
Remarks
It is important for any litigator to have an insight of all angles in respect of a lease agreement. Clients should be informed of all clauses required in respect of the type of property the client wishes to lease. In order to cover your client from incurring future delays in any circumstances that may occur in the unforeseeable future.
