The Consumer Protection Act, 2008 (“CPA”) applies to lease agreements.
It changes the common law between landlord and tenant by giving a tenant
rights not available under common law, and substantially limiting those
of the landlord. But, contrary to popular belief, the CPA does not apply to all lease agreements. This
article focuses on residential leases. From a landlord’s perspective, a
tenant should not enjoy all the rights under the CPA if this can be
avoided. The law already tends to favour tenants rather than landlords,
as anyone who has tried to evict a tenant from residential premises will
have discovered. Landlords are in a difficult enough position without
the provisions of the CPA also being made applicable unnecessarily to
residential leases, thus causing a landlord considerable prejudice.
The first question to determine if a lease is subject to the CPA to a
lease is whether the tenant is, by definition, a ‘consumer’. Entities
such as companies and close corporations with assets in excess of R1
million, or a turnover in excess of R1 million per annum, are not
“consumers” for the purposes of the CPA and leases with such entities
are thus not subject to the CPA. International corporations and
other large companies often rent homes for employees and, in most such
cases, the CPA is inapplicable to such leases. If the means test
mentioned above is applied and the entity, as a tenant, does not qualify
for the protection of the CPA, it makes little sense to prejudice the
landlord by giving such a tenant rights to which they are not, as a
matter of law, entitled. For example, the CPA’s 20-day notice
period is often written into residential leases as a matter of course.
If this happens, the corporate tenant is entitled to rely on such term
of the lease as well as any other terms and conditions which accord with
the provisions of the CPA, even though it is not, by definition, a
“consumer”.The second enquiry is whether the landlord lets
property in the ordinary course of business. If the answer is in the
negative, then no further enquiry is necessary - the CPA then simply
does not apply. But the CPA does apply if the property is let in the
ordinary course of the landlord’s business. Hence, to include the
provisions and protections of the CPA in leases as a matter of course
and without making this enquiry, can be highly prejudicial to the
landlord. A well-known legal dictionary defines ‘ordinary course
of business’ as ‘the normal routine in managing a trade or business’.
‘Business’ in turn is defined as ‘a commercial enterprise carried on for
profit; a particular occupation or employment habitually engaged in for
livelihood or gain.’ The word ‘ordinary’ is said to mean ‘occurring in
the regular course of events.’ The following questions will assist in
determining whether a property is being leased in the ordinary course of
a landlord’s business:
Does the landlord own and let more than one property? Is the property let out on numerous successive short-term lets, for example between two and six months at a time? Is the primary purpose of letting the property to make money after
deducting all expenses, or simply to enable the landlord to hold
property for another purpose, such as retirement, or while the landlord
is, for whatever reason, unable to use the property for a given period?
on Does the landlord live off the money made from the rentals and, if so, to what extent and how well does he/she live? Is the rental the landlord’s primary source of income?
These are but examples, and there are doubtless many other possible
permutations. However, a property owner who, for example, lets property
only because he/she temporarily has no call to occupy it, cannot be said
to be letting the property in the ordinary course of his/her business.
This is particularly so when he/she may be retired or engaged in a
totally different profession or occupation. Similarly, a young couple
who each own a flat before moving into one of them together, retaining
the other as a temporary investment, can hardly be said to be letting
the flat in the ordinary course of their business.In the light
of this, it is apparent that adopting a ‘one size fits all’ approach to
all residential lease agreements covering all aspects of the CPA, may
well prejudice landlords and unfairly advantage tenants.