Early Cancellation Penalty: Rental Housing Tribunal rules in favour of Landlord

Landmark Case – the Consumer Protection Act applies to Lease Agreements

Unfortunately a breakdown in the tenant / landlord relationship is not uncommon, and as TPN has discovered when there is money involved, the more severe and sometimes irrational the behaviour becomes!

As the well-known saying goes, “it is too late to lock the stable door when the horse has bolted” – meaning that it is only through completing and signing the lease agreement upfront that certainty in the event of a dispute is provided.
In a recent, landmark decision, the Rental Housing Tribunal ruled that the reasonable penalty clause in TPN’s Residential Lease Agreement was legally compliant and should be upheld. The Tribunal further ruled on the question that arose as to whether a rental agent is entitled to retain a portion of the deposit as a reasonable penalty on behalf of the landlord. The Tribunal found that the rental agent in question could retain an amount of R8,500.00 from the initial deposit of R42,450.00, over and above the costs the tenants agreed to have deducted from the deposit for maintenance issues relating to the property.

The dispute centred around the failure to refund a deposit as the result of early termination of the lease agreement by the tenant, as is required in terms of section 5(3) of the Rental Housing Act. Specifically, there was a disagreement between the tenant and the landlord regarding who was liable for the estate agent’s commission.

The Ruling finally provides some much needed clarity on the provisions of section 14 of the CPA when it comes to Lease Agreements! More specifically, the Ruling confirms that the CPA applies to leases – it is the first Ruling to deal with penalties and a claim for damages relating specifically to an estate agent’s pro-rata commission. The Ruling further goes to show that when a dispute arises, it is imperative to have a quality lease agreement in place that is up-to-date, carefully drafted and takes all relevant legislation into account. Precisely what the Tribunal would have ruled had the lease agreement not contained a clause dealing with the issue of early termination is anyone’s guess!

 “TPN is confident that landlords who make use of well-drafted lease agreements such as LeasePack and who calculate the reasonable penalty on actual damages will find themselves comfortably able to argue their case!” –  TPN Managing Director, Michelle Dickens

Subscribe to TPN’s up-to-date and repeatedly reviewed Residential LeasePack, Commercial LeasePack, Afrikaans LeasePack and SalesPack – www.leasepack.co.za

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