Almost daily there are media warnings that the Consumer Protection Act will have consequences not previously imagined or predicted.
The clause can also be nullified if the landlord and tenant can show that there are sound financial benefits to be gained from having a longer lease.
Lanice Steward, MD of Anne Porter Knight Frank says one such warning has still not been assimilated into the planning of many landlords and many are “blissfully unaware of it”.
The legislation to which Steward was referring stipulates that no property lease (whether for a commercial or a residential building) can be longer than 24 months if the tenant and the landlord are both non-juristic persons (i.e. are not working through a trust, close corporation or company).
The clause can also be nullified if the landlord and tenant can show that there are sound financial benefits to be gained from having a longer lease.
Similarly, the new legislation does not apply where the lessee has assets or turnover below R2 million per annum.
Steward says the new rulings appear to be based on the principle that the individual tenant acting solely on his own behalf cannot be held responsible for future events which may be beyond his control, e.g. the loss of a job, a decline in business or changes in this market.
“While this is sound thinking, it does make it difficult to plan and budget for a future property portfolio.”
A possible solution, says Steward, will be for the landlord to get hold of an inexpensive shelf company and insist that the tenant, with his help, takes it over and rents the property in its name.
A possible down-the-line benefit of this new legislation is that it may enable rent increases where possible to be more frequent than before, she says.
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Just a point to mention on this article. Where your author states, “[a] possible solution, says Steward, will be for the landlord to get hold of an inexpensive shelf company and insist that the tenant, with his help, takes it over and rents the property in its name”, I think it would be beneficial to add that landlords should in this instance, and/or whenever leasing or the similar to juristic entities, ensure that they have a right of recourse against the tenant in their personal name. Should the landlord lease to a juristic entity, and not have a suretyship and/or guarantee from the tenant “standing behind” the juristic entity, the landlord may well find themselves in a situation where their only right of legal recourse is against an entity with no money or assets, being only able to obtain a “hollow judgment”. - Christopher
When are these people going to stop scare mongering about the NCA. The fact is simple if it is a private person Landlord that does not carry put the renting of property is his ” usual course of business”, then the NCA does not apply, end of story and therefore this article is again misleading as a so called “expert” does not actually understand what he is talking about.There is a lot of so called “experts” who are causing chaos by their ignorance and looking whether by design or ignorance to make money out of scaring and exploiting the average member of the public. - Tony