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WCLawyer
WCLawyer, Attorney
Category: South Africa Law
Satisfied Customers: 14753
Experience:  L.LB (UOVS)
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Lessor has a year contract - has given 3 months notice and

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Lessor has a year contract - has given 3 months notice and motivated to find a new tenant for owner by contacting all rental agents in the area. One has been found but requires a year's rental - owner refuses to grant this - will only give 6 months plus month to month after that. Lessor can no longer meet the payment on the lease and has been offered rent-free accommodation. If she moves out after her 3 month notice period is up, what legally are the implications for the lessor in this case?
Submitted: 10 months ago.
Category: South Africa Law
Expert:  WCLawyer replied 10 months ago.
Good day and thank you for your question. My name is XXXXX XXXXX I will try and assist you today.

The Consumer Protection Act does allow for the early termination of a fixed term contract within the fixed term. This is regulated by section 14 of the Act.

14. Expiry and renewal of fixed-term agreements.—(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.

So, to summarize, you can terminate early by giving 20 business days written notice of your intent to terminate, but the service provider can claim from you a reasonable cancellation amount.

Like you can see, the Consumer Protection Act does not put a set penalty amount when you terminate the agreement within the fixed term. The Act does make provision for the Minister to set particular criteria that must be adhered to.

This is included in Item 5 (2) of the Regulations.

5(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 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 canceled reservation; and
( j) the general practice of the relevant industry.

The only other way to terminate a fixed term agreement within the fixed term is if there is some breach of contract from the supplier, or if the supplier agrees that it may be canceled without penalty.

The fact that you were able to provide him with a suitable tenant is going to count against him. If he himself is not taking any active steps in finding a new tenant, that as well is going to count against him. A three month notice period is a substantial notice period and it may even eradicate his right to claim any cancellation period at all.

If there was an agreement that the contract can be ended within the fixed term on three months' notice, the right to a cancellation fee would also have been removed.

This is new legislation, however and there is no case law at the moment dealing with this, but this is how I believe it will eventually pan out.

I hope I have answered all of your questions and addressed all your concerns, but if you have follow up questions before you rate, feel free to ask them at no extra cost. If you are satisfied with the service, kindly rate it positively.
WCLawyer, Attorney
Category: South Africa Law
Satisfied Customers: 14753
Experience: L.LB (UOVS)
WCLawyer and other South Africa Law Specialists are ready to help you
Customer: replied 10 months ago.

Thank you - the term 'reasonable cancellation amount ' how would/could that be configured? Realistically, having done all I have done and given all the notice I have given it seems unlikely that, even if the owner were to try to sue me for the rest of the rental period, she would be unlikely to be successful ?? The agreement re 3 month cancellation was Verbal is this still binding?


Thank you


Lan

Expert:  WCLawyer replied 10 months ago.
The Act does not say what a reasonable cancellation amount is, but gives guidelines in the Regulations. The guidelines was included in the original answer but I will repeat it here.

5(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 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 canceled reservation; and
( j) the general practice of the relevant industry.

I think that, ultimately, a court will not go past two or three months' rental as a reasonable cancellation amount. The length of the notice period also needs to be taken into account. Yours was already three months, plus you provided him with a suitable tenant, so, from where I am sitting, chances are that he will not be able to claim anything from you by way of a cancellation amount.

Like I said, I have no case law on the principles the court applies yet, so this is my own interpretation.

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