Consumer Watch: Landlords - don’t skimp on a cheap, generic lease
Gauteng / 4 November 2019, 12:28pm / Georgina Crouth
With a shrinking pool of quality tenants, a steady decline in the percentage of residential tenants considered to be in “good standing”, and the law skewed in favour of tenants, being a landlord is no piece of cake.
It’s not only about finding and vetting tenants - it’s also about keeping a “good” tenant.
And if your lease, which is the cornerstone of the relationship between the landlord and tenant, isn’t drafted correctly, both parties could open themselves up to financial hardship and even legal trouble.
In the latest TPN quarterly survey, which is due for release this week, vacancy rates are shown to be increasing nationally.
Theo Swanepoel, the head of analytics at the rental market credit bureau, says that in the second quarter there appeared to be a slight recovery. But the third quarter isn’t positive: it showed a 9.42% vacancy average across the country - “the highest we’ve seen since the beginning of 2016, which is when we first started conducting the surveys”.
He says: “There appears to be an oversupply and a weakening market, but Gauteng has had massive amounts of building, which may be adding to the oversupply.”
The tenants in good standing segment has been drifting downwards slightly, at 81.76%. And while there isn’t as much demand as before, landlords haven’t been placing poorer quality tenants, nor do they appear to becoming desperate.
Still, it’s a tough market to be in: tenants seem to have all the rights and once the Rental Housing Amendment Act comes into play, being a landlord will become even more onerous.
For now, leases don’t have to be in writing to be binding until the Rental Housing Amendment Act comes into effect, but once a date has been set, it will become a legal requirement.
Under the amendment, there will be even stricter penalties for landlords, who could be fined - or even imprisoned for up to two years - if they fail to provide tenants with written leases; don’t repay deposits with interest accrued; lock or drive out tenants; fail to ensure tenants have access to basic services such as water, electricity and refuse collection; provide a dwelling that is uninhabitable; or don’t maintain the premises.
Tenants may also not be barred from entering the rental property, without a court order.
Most of these are already required in the RHA but the amendment is more punitive and onerous on the landlord.
Why the CPA matters
The Consumer Protection Act, which applies to every transaction in South Africa, is also applicable to residential leases and the relationship between landlords and tenants - especially in terms of unfair contract terms and market practices. It’s aimed at protecting consumers against exploitation, unfair treatment and unscrupulous business practices - but not to empower them to act deceitfully or exploit suppliers.
The Act provides tenants with better protection than before. Section 14 has important implications for landlords: While a tenant may cancel a lease on 20 business days’ notice, the landlord is entitled to charge a reasonable cancellation penalty; a landlord (“supplier”) who wants to renew the lease must send a tenant (“consumer”) an offer to renew not more than 80 and not less than 40 business days before the lease will expire; and a fixed-term contract/ lease may not be longer than 24 months, unless both expressly agree to a longer term - and the tenant can be shown to benefit from the extended term.
Section four of the CPA states that if a lease contains an ambiguously worded clause, that could be interpreted to favour either landlord or tenant, the clause must be interpreted to benefit the latter.
Section 48 outlaws contract terms that are “unfair, unreasonable and unjust”.
Terms can be deemed to be unfair if they exclude or restrict a consumer’s rights or remedies when a supplier breaches any of its obligations under the agreement.
Leases may also not, under section 51, include clauses that are counter to the CPA.
They cannot contain clauses that waive or deprive tenants of their rights under the Act, set aside or override the “effect” of any of its provisions, or void landlords’ obligations.
And Sections 54 and 55 govern a consumer’s rights to quality service and to safe, good-quality goods.
These provisions mean landlords must provide the property to the tenant in the state that was agreed upon, and maintain it to that standard throughout the lease’s duration.
Lock it down
It’s a relationship that needs to be clearly and legally defined - and it doesn’t fit comfortably into a template.
Top rental property lawyer, Marlon Shevelew has raised concern about generic leases, saying they are problematic - for both landlords and tenants.
“My blood curdles when I read some of the leases that you buy online or in retail outlets,” Shevelew says, noting that they’re often outdated, formulaic and “hugely problematic” legally.
“The CPA almost always will trump whatever the lease says about the contractual relationships but the lease is the first port to call to deal with landlord-tenant disputes.
If a tenant feels aggrieved by the terms, they need to look at the CPA, in particular sections 48 and 51, which says that you can’t force a tenant to waive their rights.”
He says while these generic leases might be less costly than having a lease drafted by a professional, it really matters when it comes to litigation, which is when the real costs begin.
“These companies are providing consumers with leases that are potentially problematic but they are much cheaper.
“They don’t have the necessary protective clauses in them. The lease needs to embody all the salient terms and conditions.
“And it needs to consider who the landlord and tenants are, type of property etc. If I was presented with such leases, I would rip it apart.”
Shevelew says while no lease is infallible, you have less chance of exposure if you have one drafted by a specialist rental property lawyer.