The Consumer Protection Act (CPA) does NOT apply to all lease agreements (or rental agreements). This is really important to know because the Consumer Protection Act has a big influence on the lease and changes the legal position between the landlord and tenant significantly. If you are a landlord, you do not want to give a tenant all the rights under the Consumer Protection Act if you do not have to do so by law. Landlords are in tough enough position as it is. Currently, the law is very much in favour of tenants, rather than landlords. Anyone who has recently tried to evict a tenant through our courts recently will know this. Tenants already have lots of protection.
The Consumer Protection Act and Lease Agreements
There are two questions that one needs to ask:
1. Does the landlord lease property in the ordinary course of their business?
If the answer is yes, you need to ask the second question. If no, the Consumer Protection act does NOT apply. You do not need to ask the second question and it is irrelevant.
It is hard to answer the question though and there is uncertainty. What is the “ordinary course of business“? Wikipedia gives us an explanation that is not very helpful. Blacks Law Dictionary is useful. They define “course of business” as “the normal routine in managing a trade or business”. And a “business” as “a commercial enterprise carried on for profit; a particular occupation or employment habitually engaged in for livelihood or gain”. And “ordinary” as “occurring in the regular course of events”.
When is a landlord (who could be a natural or juristic person) in the business of leasing property?
- When they lease more than one?
- When they lease it out to many people on short-term lets, like three months at a time?
- When they intend to make money?
- When they make money from leasing property, after deducting bank payments and levies from the rental they receive? Many people lose money when leasing out property.
- When they make enough money off leasing property to live off? How well?
- When they make more money from leasing property than from other activities?
Is a natural person who rents out their garden cottage to a friend (whilst working full time for a corporate) in the business of renting out property? Surely the CPA does not apply. Parliament could not have intended this. The National Consumer Commissioner (NCC) or our courts may clarify this in time, but until then there is uncertainty. If you are a landlord, you might want to argue that you do not lease property in the ordinary course of business, until someone clarifies the situation. I’d be interested in your thoughts. We will be doing more research to help people answer this question.
Is the tenant a consumer?
There is certainty here. All natural people are consumers regardless of their net asset value. For juristic persons (like companies) the normal thresholds apply and it is quite easy to determine who is and who is not a consumer. Any juristic person whose asset value or annual turnover, at the time of entering into the transaction (lease agreement), equals or exceeds R2 million, is a consumer.
How we can help
- Help you determine whether the Consumer Protection Act applies to lease agreements.
- If you are a tenant, review lease agreements that a landlord has presented to you.
- If you are a landlord, provide you with a lease agreement template you can use to sign leases.