A Property24 Reader terminated her fixed lease 3 months before end of lease and gave a months’ notice in writing. A new tenant was secured within 7 days of moving out and she was advised that she had to pay 2 weeks rent until the new tenant moved in and no penalty would be charged.
"My deposit was refunded but not the interest nor the rent for the remaining 1,5 months paid in advance. I requested a breakdown of accrued interest but this was refused. Three weeks after the tenant was secured, I have been told they cancelled their agreement and I am now liable for the remainder of rent. Surely this is no longer my responsibility?” asks the reader.
Anli Koen attorney at Herold Gie Attorneys shares the following advice:
The tenant’s right to early cancellation of a lease agreement
Firstly, a distinction needs to be drawn between “terminating” and “giving notice to the landlord” in respect of a fixed lease agreement. The reader should refer to the specific terms of the Lease Agreement that pertains to the early cancellation and the implications thereof.
Be that as it may, section 14 of the Consumer Protection Act No. 68 of 2008 (hereinafter referred to as the “CPA”) provides that a tenant is entitled to cancel a lease agreement on 20 business days’ notice without reason. Regardless of the reason for the cancellation of a fixed term agreement, a tenant still remains liable to the landlord for any amounts owed in terms of the lease agreement up to the date of cancellation. The landlord in turn has the right to impose a reasonable cancellation penalty for early cancellation and demand that all outstanding amounts owing in terms of the lease agreement be paid up to the date of cancellation.
On the basis, that the reader provided the landlord with the requisite 20 business days’ notice, he/she is only liable for the rental amount owing up to the date of cancellation. It would appear that by virtue of the landlord confirming either verbally or in writing that “only 2 (two) weeks rental was payable by the tenant until the new tenant moved in and that no penalty would be charged” the landlord agreed and set the cancellation terms with the tenant upon receiving notice from the tenant.
What is a reasonable penalty?
Regulation 5(2) of the CPA provides that a penalty may not exceed a reasonable amount, taking into account the following various factors:
- The amount that was still owing under the remainder of the lease 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 (i.e. what is a landlord entitled to charge on early termination of a lease agreement?)
A penalty may include (i) credit check and advertising costs in respect of any prospective replacement tenant (proven by way of invoices) and (ii) rental (i.e. the exact number of days that the premises remain vacant after the tenant vacates).The calculation of the penalty amount can only be made once a replacement tenant has been found, so a landlord is not entitled to provide a tenant with a penalty calculation on the day that the tenant cancels the agreement.
On the basis that the reader paid 2 (two) weeks rental up until the date that the prospective replacement tenant was purportedly to move into the premises as agreed with the landlord upfront, the reader should dispute the landlord’s claim that he/she is liable for any further amount over and above the 2 (two) weeks rental already paid by him/her.
A cancellation penalty should not be exorbitant, excessive or unfair. The tenant should in this instance, lodge a complaint with the local Rental Housing Tribunal in order to determine whether the landlord withholding the 1.5 (one and a half) months’ rent (paid upfront by the tenant), constitutes an “unfair practice”.
Tenant’s right to interest accrued on the deposit
In terms of section 5 of the Rental Housing Act No 50. of 1999 (as amended) a landlord has an obligation to place a tenant’s deposit in an interest-bearing account for the benefit of such tenant with a bank or financial institution. At the end of the lease agreement, the deposit plus the accrued interest thereon must be paid to the tenant within 7 (seven) days from the date of expiration of the lease agreement.
In conclusion, the reader should lodge his/her complaint relating to the unfair practice in respect of the (i) landlord withholding the 1.5 (one and a half) months rental paid upfront and (ii) the tenant not receiving any interest on the deposit with the applicable Rental Tribunal. The tribunal will then conduct an enquiry to determine whether the landlord’s conduct constitutes an “unfair practice” and make the necessary ruling that shall be enforceable and binding on the parties.
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