Know the law of renting out property

23 Jul 2012

There are various laws which govern the way one does business, particularly when it comes to renting out premises.  

Knowledge is always the essential ingredient when protecting yourself and your business, and knowing your rights and obligations is vital in ensuring a successful and stress free association, says Dianne Brock, general manager of the Institute of Estate Agents, Western Cape.

Knowledge is always the essential ingredient when protecting yourself and your business, and knowing your rights and obligations is vital in ensuring a successful and stress free association, says Dianne Brock, general manager of the Institute of Estate Agents, Western Cape.  

Attorney Marlon Shevelew and the Institute run regular rental seminars and a topic that is often discussed is what laws apply when renting out a property.  

With the promulgation of the Consumer Protection Act there are various rules and requirements which apply to leasing. In a lease agreement, the parties are bound by obligations which include invariable obligations (which are part of the contract whether either of the parties want to have them or not), provisions that the parties have contracted into and residual obligations (which are common law obligations, i.e. what the law imposes in the absence of an agreement). 

The main sources of invariable obligations when renting out property is applied by the Rental Housing Act but this applies only to residential property and the CPA applies to all lease agreements, be they residential, commercial or industrial. 

However, there are exceptions to this. For example, one of the main exceptions is that a tenant company, close corporation, body corporate, partnership or trust with a turnover of R2 million or an asset value of R2 million will not have the protection of the CPA. In short, the CPA will not apply to these entities. 

The CPA applies when the lease is entered into in “the ordinary course of business” and in the case of lease agreements it will seldom happen that the agreement is entered into other than in “the course of business”. The one exception to this might be leases in unusual circumstances such as someone renting out their primary residence while away for a few months, says Shevelew.  

The CPA contains both “negative” rights such as a duty on landlords not to include unfair, unreasonable or unjust terms in lease agreements, as well as “positive” rights, including the right for a tenant to demand “quality service” from the landlord. 

Residual obligations stem from common law and these would include such conditions as allowing tenants full enjoyment of the premises for the entire lease agreement, to maintain the premises and to pay all charges against the premises. 

Generally, says Shevelew, parties may contract out of these obligations by stating so in the lease agreement, provided that it is not done in a manner inconsistent with the Act,but it must be remembered that most residual obligations are imposed on the landlord, not the tenant. "Essentially 'shifting' those to the tenant may, therefore, fall foul of theConsumer Protection Act, so caution must be exercised before doing so.” 

It is important to note that rentals are not governed by only one law, but work in conjunction with various other laws, says Brock. "Shevelew brings this across very clearly and helps us to understand how the various acts would be applied." 

Falling foul of the law can be a very costly exercise, she says, and ensuring your lease agreement complies with the various required provisions is the first step to making sure this does not happen with your investment or contract.  

"Ensuring the various requirements are negotiated and included at the outset of the lease will preempt any confusion and expense later,” says Brock. 

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