A Property24 Reader asks, "I would like to know if I am liable for paying a breach fee if I decide to not rent the apartment, I signed the lease but did not pay the deposit or administration fee."
Property Expert Jaco Rademeyer replies:
In a situation such as the above, there are different rules that apply depending on the nature of the agreement and the timing of certain actions. Should the Agreement of Lease be subject to the application of the Consumer Protection Act, there are two important provisions to take note of:
1. The consumers right to cooling-off in terms of section 16:
This entitles the tenant to cancel a lease within 5 (five) business of concluding the agreement without reason or penalty. The landlord would then need to reimburse the tenant of any monies paid in advance. It is important to take note however that this right can only be invoked provided the agreement was concluded as the result of direct marketing.
To put it differently, that a rental agency approached the tenant directly by email or via alternate electronic means, personal visits or telephone calls. The direct marketing must occur in the ordinary course of business otherwise it will not be deemed as direct marketing as envisaged by the Act.
2. The consumers right to cancel in terms of section 14:
Should 5 (five) business days have already lapsed, a tenant may cancel the lease at any other time by giving the landlord 20 (twenty) business days’ notice. This is applicable irrespective of the actual terms contained in the lease as a tenant cannot contractually exclude the application of any Consumer Protection right. This cancellation however, is subject to the landlord being entitled to impose a reasonable cancellation penalty.
What is “reasonable” will depend on the surrounding circumstances taking into account the factors listed in the Consumer Protection Act Regulations.
In the event where the Consumer Protection Act is not applicable (which is not often), the position is not as simple for the tenant. Once the lease has been validly concluded, it is a binding agreement with legal obligations.
Should the tenant sign and thereafter wish to cancel, no matter how early, there are 2 possible scenarios namely an agreement with a cancellation clause and an agreement without one.
Should there be such a clause, it is as simple as enforcing the contents envisaged within it. In the absence of the cancellation clause, the landlord can approach a court of law to obtain an order for specific performance to compel the tenant to remain in the contract to its expiry. Alternatively the landlord can claim contractual damages equivalent to the rental due for the balance of the entire lease.
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