Firstly, how can I cancel my lease agreement early if there is no termination clause?
- If your agreement does not make provision for early cancellation then you will rely on the provision of the Consumer Protection Act as well as the Rental Housing Act.
- If the lease agreement does make provision for early termination, you will have to rely on the termination clause SUBJECT to the lawfulness of the clause. Meaning if the clause does not comply with the applicable laws, you would be able to challenge this.
- If the parties agree to a notice period in the agreement, either party may give notice and the agreement will terminate as per the terms of the agreement.
- If no notice period was agreed to in the agreement but early cancellation was provided, the parties may then rely on the common law principle which is that one calendar months’ notice must be provided.
What does the law say about a tenant terminating their lease agreement early?
- The consumer protection act specifically allows for this and provides for early termination if it is a fixed-term lease agreement (so for a specific period of time) & if the person entering the agreement is a natural person and not a juristic person (company).
- Section 14(2) of the CPA provides that the tenant must give a minimum of 20 business days written notice to the landlord of their intention to terminate the lease agreement.
- It is really important to note that the tenant will remain liable to the landlord for any amounts currently owing to the landlord in terms of the agreement up until the date of cancellation AND the landlord is well within his/her right to impose a reasonable penalty.
- When it comes to your deposit, the landlord is required by law to invest the deposit in an interest-bearing account, with interest accrued being owed to the tenant.
- Landlords are required to return the tenant’s deposit within a reasonable time after the termination of the lease.
- Tenants are responsible for any outstanding rental arrears and damages caused to the property beyond normal wear and tear. It is essential for tenants to understand their obligations regarding rent payment until the lease termination date.
What exactly is a reasonable penalty fee?
- This can be found in Regulation 5(3) of the R293 CPA Regulations and these regulations actually provide guidelines in this respect. They do not clearly define how to calculate the reasonable penalty fee and rather provide a guideline. ‘
- Regulation 5 stipulates that:
“(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 cancelled reservation; and
(j) the general practice of the relevant industry.
(3) Notwithstanding subregulation (2) above, the supplier may not charge a charge which would have the effect of negating the consumer’s right to cancel a fixed term consumer agreement as afforded to the consumer by the Act.”
In general practice, the factors that are considered greatly include:
- The actual loss sustained by the landlord due to their inability to find a new tenant;
- Advertising costs; and
- The rental agent’s pro-rata fee.
It is really important to note that the landlord must prove that they attempted to mitigate their damages and took positive steps to find a new tenant. In general, an amount equal to 2 months rental is awarded if the landlord is unable to find a new tenant.
What should I do if a dispute arises between myself and the landlord due to the early cancellation?
- It is advisable to first try mediation or negotiation with the landlord to reach a mutually acceptable resolution. Mediation services may also be available through relevant rental housing bodies or organisations.
- If mediation fails, both parties can seek legal recourse through either the Rental Housing Tribunal or the Courts.
- It is important for both landlords and tenants to seek legal advice and understand their rights and obligations before pursuing legal action.