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THE CONSUMER PROTECTION ACT AND RESIDENTIAL LEASE AGREEMENTS

The question how the provisions of the Consumer Protection Act 68 of 2008 ("the CPA") should be applied to residential lease agreements has been the topic of debate within and outside the legal fraternity for some time.

 

The CPA defines a 'consumer' as a person to whom goods or services are marketed in the ordinary course of a supplier's business, or who has entered into a transaction with a supplier in the ordinary course of a supplier's business. The definition includes a person who is a user of the goods or a recipient or beneficiary of the service irrespective of whether that person was a party to a transaction concerning the supply of the goods or services.

 

From this definition it is clear that for the CPA to apply to a residential lease agreement, the tenant would have to qualify as a consumer in terms of the CPA and the lease agreement would have to be entered into in the ordinary course of the landlord’s business.

 

In the recent judgment of the Venter and Another v Els and Another (3639/2024) [2024] ZAWCHC 83 (18 March 2024) the Western Cape High Court had to determine this question and specifically looked at what ‘in the ordinary course of business’ means.

 

In the Venter matter the tenant argued that the CPA was applicable to the lease agreement as the tenant wanted to rely on the provisions of section 14(2) of the CPA to prevent the early termination of the lease by the landlord.

 

The court referred to the approach of the National Consumer Tribunal as set out in Doyle v Killeen and Others and confirmed that an objective evaluation considering all the relevant facts and circumstances should be followed to determine whether a transaction was in the ordinary course of business.

 

The court further specifically held that a once-off sale or lease agreement does not qualify as ‘in the ordinary course of business’ and that the CPA was therefore not applicable to the lease.

 

In the matter of Transcend Residential Property Fund Limited v Mati and Others (14639/2017) [2018] ZAWCHC (20 March 2018) the same court looked at the application of the CPA in relation to residential lease agreements.

 

Here, it was argued by the occupier of the residential property that he was a 'consumer' as defined in the CPA and therefore he had to be given twenty (20) business days’ notice of his breach of the lease agreement in terms of section 14(2)(a)(ii) of the CPA before the lease could be cancelled.

 

Section 14(2)(a)(ii) of the CPA holds that if a consumer agreement is for a fixed term 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.

 

The court considered the definitions of 'consumer' and 'transaction' as defined in the CPA, looked at the preamble of the CPA and its purpose and ultimately held that the occupier was indeed a consumer in terms of the CPA. It was thus decided that the CPA was applicable to the residential lease and that the consumer was entitled to twenty (20) business days’ notice when in breach of the lease agreement, before the lease could be cancelled.

 

It is however important to note that in the Transcend matter the landlord was a Real Estate Investment Trust that leased out residential properties in the ordinary course of its business.

 

Considering the above we are of the view that if a person leases out a residential property to a natural person for a fixed term and it is not in the ordinary course of that person's business section 14(2)(b)(ii) of the CPA is not applicable to the lease agreement.

 

Should it be in the ordinary course of the landlord’s business, as in the case of the Transcend matter the CPA and more specifically section 14(2)(b)(ii) would apply, and landlords would have to provide their tenants with twenty (20) business days (effectively a calendar month) notice of breach before they can cancel the lease agreement.

 

Having said this, there will be those in the legal fraternity and outside, who disagree with our interpretation and ultimately it might be best to give all tenants who are in breach of fixed term lease agreements twenty (20) business days’ notice before cancelling the lease agreement. By doing this the landlord can be sure that the CPA argument cannot be raised by the tenant or the court in subsequent eviction proceedings.



At VST Attorneys we specialize in evictions and regularly assist landlords through this cumbersome, but necessary process.

 

Written by Adriaan Engelbrecht (Associate)



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