Property Law: Early Cancellation of a Lease Agreement

2020 has been an unpredictable year, to say the least. Each new week seems to hold its own uncertainties and concerns. In such times, tenants of residential property may be forced to reconsider their lease obligations due to a change of personal circumstances necessitated by COVID-19 and the pursuant lockdown. Tenants should carefully consider their options before cancelling a lease.

As a point of departure, the tenant should consult the lease agreement to check whether there are any provisions pertaining to early cancellation. If there is no such clause, or if the terms of the clause do not provide for acceptable relief, the tenant should consider approaching the landlord with a view to negotiating an agreement.

If the landlord and tenant are not able to reach an agreement then, before relying on the legal remedies that are available, which will inevitably be time-consuming and stressful, the landlord and tenant should consider agreeing to appoint an independent mediator. Mediation, by a trained and accredited commercial mediator, is an informal process that can be arranged at short notice. Through a process of confidential dialogue with the landlord and the tenant, the mediator will assist them to resolve the issues to their mutual satisfaction. The advantage of the process of mediation is that each party is able to make confidential disclosures to the mediator who will then be able explore their respective interests and to assist them in reaching a solution. The process is one that will help in avoiding stress and antagonism.

Should the parties be unable to reach an agreement the tenant may resort to the Consumer Protection Act 68 of 2008 (“the CPA”), which will generally be applicable to residential lease agreements, except in rare circumstances.

If the CPA is applicable to the lease agreement, the tenant would be entitled to cancel the lease agreement at any time, even if there is no cancellation clause in the agreement. Section 14(2)(b) of the CPA states that a tenant may cancel the lease agreement by giving 20 business days’ notice in writing, despite any provision of the lease agreement to the contrary, subject to liability for a reasonable cancellation penalty. Regulation 5 of the CPA provides as to what a “reasonable cancellation penalty” entails, which may require negotiation or determination by the National Consumer Tribunal or the Rental Housing Tribunal if the cancellation penalty is excessive or unfair.

Upon expiry of a fixed-term lease agreement the lease agreement will automatically continue on a month-to-month basis, unless the tenant expressly agreed to the renewal of a further fixed-term or terminated the agreement upon the expiry date. In such a case, the provisions of the Rental Housing Act 50 of 1999 are relevant. The landlord can cancel the lease agreement, in terms of the Act, by giving one calendar months’ notice, which is a notice that must be given before the end of the month, to terminate the contract at the end of the next month. (Luanga v Perthpark Properties Ltd 2019 (3) SA 214 (WCC)).

There are therefore various considerations at play when a tenant considers premature cancellation of a lease agreement. Before giving notice of cancellation to a landlord, tenants should consult an attorney for advice on the best approach to be adopted, in order to avoid unnecessary stress and an exorbitant cancellation penalty.

David Smit l Accredited mediator, South Africa and UK

This article is for general information purposes and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us At DKVG Attorneys for specific and detailed advice.