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Cancelling a Lease Agreement: Breach of Contract vs Early Termination  #AskEtchells

Lease agreement cancellations are tricky at the best of times. Gladwin and Pretorius of Schindler’s Attorneys stress the difference between cancelling a lease agreement before the termination date and cancelling due to a breach of contract. Both terminations are subject to the Rental Housing Act (1999) and the Consumer Protection Act (2008), and both fall under the South African common law.

Lease Cancellation due to a Breach of Contract

According to the Rental Housing Act No. 50 (1999), section 4 (5) (c) a landlord may terminate a lease if the tenant is in breach of contract on grounds that do not constitute unfair practice.The landlord is required to give the tenant at least 20 working days to remedy the situation, depending on the severity of the breach in question, after which the landlord may terminate the agreement. Lease agreement violations contradict the conduct agreed upon by both parties beforehand. For the most part these include the tenant failing to pay the rental amount in full every month, expressly prohibited illegal, dangerous or life-threatening behaviour within the dwelling or on the property premises, intentional damage to the property or continued noncompliance with body corporate rules and regulations at the expense of the other tenants in the complex/estate.

The Consumer Protection Act makes provision for landlords in this position to claim a reasonable cancellation penalty fee from the tenant. The CPA provides guidelines in Regulation 5 on how to go about this – taking into account the length of notice given and the time it would take to replace the vacating tenant. The landlord has no right to unlawfully disconnect water and lights, forcefully remove the tenant or change the locks to keep a tenant out of the property. In fact, should the landlord wish to terminate the lease and repossess his property – and the tenant is not in agreement – the landlord must obtain an order from the court. Fines and imprisonment have been implemented as a deterrent to landlords who continue to evict tenants unlawfully or violate their rights in any such way.

Likewise, the tenant has the right to terminate the lease agreement if the landlord fails to perform his duties – within reason – as stipulated in the lease agreement; some of which include ensuring that the property remains fit to live in, and that repairs and maintenance, especially those affecting the tenant’s living conditions, are completed in a timely manner.

Both parties are given time to remedy the situation, failing such the innocent party is within their rights to terminate the lease agreement before expiration and claim damages if necessary.

Lease Cancellation before the Lease Expiry Date

On the other hand, the CPA allows for the lawful cancellation of a lease agreement at any time by giving 20 business days’ notice, however, in this case the landlord shall be allowed to charge the tenant a cancellation fee in order to recover costs. This fee must be agreed in the lease agreement. The tenant or landlord may cancel the lease agreement before the agreed upon termination date, provided that the cancellation complies with both the Rental Housing Act No (1999) and the Consumer Protection Act (2008).  This is the more common of the two, and is usually the result of unforeseen circumstances such as job loss, changes in the family structure, relocation or emigration. A cancellation is permissible so long as both parties agree.  This is made easier if the landlord and tenant included a cancellation clause in the lease agreement allowing for early termination if necessary based on acceptable terms.  However, if the two are not in agreement, or there is no cancellation clause in the lease agreement, the CPA or the RHA legislature apply.

Most reputable estate agencies will adhere to section 14 of the Consumer Protection Act (2008) in the case of a tenant cancelling a lease agreement before the expiry date, and make provision for this in their leasing contract. These agencies ensure that their lease agreements comply with the stipulations of both the RHA and CPA. Etchells & Young’s lease states that the landlord is within his rights to claim a cancellation penalty equal to 2 month’s rent if the cancellation is received when more than 6 months remain before the expiry of the lease agreement or a cancellation penalty equal to 1 month’s rent if the cancellation is received when less than 6 months before the expiry of the lease agreement.  The CPA only applies to Natural Persons, and not Juristic Persons – who are required to give +2 month’s written notice and to pay the rental until a new tenant is found.  The RHA states that on cancellation the tenant is obligated to return the property to the landlord in a good state of repair, save fair wear and tear.

If the tenant vacates the property without sufficient notice to the landlord before the expiration of the lease – typically 20 business day’s written notice or as stipulated in the lease’s cancellation terms – the landlord retains all his rights arising from the tenant’s breach of contract. As compensation for the rental income the landlord loses in the tenant vacating without notice and potential loss of rental income until a replacement tenant is found the landlord is within right to withhold the tenant’s deposit to recuperate costs.

In conclusion, the landlord may only cancel the lease if the tenant is in breach and does not remedy the breach within the specified time. The tenant may legally cancel the lease at any time, but the termination of the lease agreement before it’s expiry will incur cancellation penalties. The landlord has the right to charge a reasonable cancellation fee as per the lease signed, based on the remaining lease period before expiry.