Are you thinking of cancelling your lease agreement? This is what you should know from a lawyer

By Robyn Shepherd

The relationship between a landlord and a tenant is one of vital importance. Therefore, both parties must be aware of their responsibilities, specifically when terminating a lease agreement before its expiry.

There are several reasons for tenants wanting to terminate their lease agreement early. As most of us experienced, the Covid pandemic meant many people were retrenched and could not afford their rent.

It is important to consider what the contract between the landlord and the tenant says, as well as consider the Rental Housing Act 50 of 1999 for residential leases and the Consumer Protection Act 68 of 2008, which applies to both residential and in some instances, commercial leases in order to consider whether one may terminate the lease agreement. The common law may also apply to interpreting the lease agreement.

The Consumer Protection Act

In terms of section 14 of the Consumer Protection Act, a tenant may terminate the agreement at any earlier time by giving the lessor twenty business days notice in writing. The tenant will remain liable to the lessor regardless of the reasoning for termination the fixed term lease agreement.

A tenant has the right to cancel a lease agreement; however, once the lessee has exercised their right to early cancellation, the lessor has the right to impose a reasonable cancellation fee and claim all remaining amounts owed in terms of the lease.

Regulation 5(2)1 of the CPA provides that a penalty may not exceed a reasonable amount taking into account various factors such as:

• The amount that was still owing under the remainder of the period;
• The value of the transaction up until cancellation;
• The duration initially agreed upon;
• The length of notice of the cancellation;
• The potential for the landlord to find another tenant; and
• The general practice relevant to the industry

The lessor may charge the lessee for the following where a lease is terminated early:

• Credit checks for any prospective replacement tenants;
• advertising costs; and
• rental.

Only once a new tenant has been secured, can the penalty fees be determined by the lessor as all the calculations would have to be factored into the final fees so incurred by the landlord as a result of the early termination by the tenant.

Lessors may cancel the agreement with 20 business days’ notice to the tenant but has to provide proof of the following that there is a material failure by the lessee to comply with the provisions of the lease agreement and that the lessee had been requested to remedy the breach but failed to do so and further provided that such breach is not on the grounds that would be regarded as a materially unfair practice.

Cancellation of a lease agreement as a result of a material breach of the agreement

Lease agreements may also be cancelled if the lessor or the lessee does not fulfil obligations in terms of the lease.

In the case of Vela v Dos Santos 2 , the parties entered into a lease agreement in February 2015 in respect of a residential property situated in Bryanston and in terms of the lease agreement, the Respondent (“the lessee”) would pay monthly rental in the amount of R150 000.00.

The rental amount for the total rental period of six months, amounted to R900 000.00, and the deposit to be paid in terms of the lease agreement amounted to R300 000.00. However, when the lessee began occupying the premises, two flatlets on the property were already occupied by tenants.

Consequently, the parties agreed on the insertion of a special condition into the lease agreement which stated that the lessee would receive a concessionary discount of R60 000.00 from the total rental amount due for the full lease period, while the two flatlets are occupied, and that the flatlets’ leases would terminate on 30 April 2015 and the occupants would then vacate the property. Thereafter, the lessee paid the reduced rental amount of R840 000.00 for the full lease period of six months plus a R300 000.00 deposit upfront.

Despite the agreement mentioned above, the Appellant (“the lessor”) failed to ensure that the tenants vacated the flatlets on 30 April 2015. Consequently, the lessee advised the lessor of the breach and afforded the lessor seven days to remedy the situation, failing which, the lessee would cancel the lease agreement.

The lessor failed to remedy the breach and the lessee proceeded to cancel the lease agreement and claimed a refund of a portion of the rental amount that she had paid. After that, the lessor accepted the cancellation but refused to refund the money to the lessee.

The lessee then proceeded to institute a claim against the lessor. The court held that the lessee was entitled to cancel the lease agreement according to the lessor’s breach of a material term thereof.

The court held that, considering the circumstances of this case, the lessee had the option of either cancelling the lease agreement or instituting a claim against the lessor for specific performance. Further, the common law permits cancellation of a lease agreement where there has been a material breach, even in the absence of a clause allowing same.

In conclusion, both parties to a lease agreement have rights and obligations, and it is imperative to understand the consequences of not following through. Cancelling a lease agreement may cause you financial burden if not done correctly.

Robyn Shepherd is an Attorney at SchoemanLaw Inc

** The views expressed do not necessarily reflect the views of Independent Media or IOL.

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