07 June 2023
There are always so many questions regarding what can be claimed against a Tenant should they require to terminate a Lease Agreement be for the natural expiry. In this article we will cover what is expected from a Landlord and a Tenant when dealing with early cancellation.
In South Africa, we are governed by two Acts when renting a property, namely, the Rentals Housing Act (RHA) and the Consumer Protection Act (CPA). Under these, the CPA allows a consumer (in this case the Tenant), the right to cancel the fixed term agreement, in writing, giving 20 business days notice , however, the consumer will be held liable for the ‘reasonable penalty’ associated with this early termination. All Lease Agreements must include an early cancellation clause to be compliant with the CPA.
What Tenants and Landlords need to consider when a Lease Agreement is terminated early:
As a Tenant you can be held liable for a reasonable early cancellation penalty fee when giving notice to terminate a Lease Agreement before the natural expiry. This early cancellation penalty fee must be stipulated in writing in your Lease Agreement and can not be an amount that might prohibit the Tenant from canceling the Lease Agreement early. It is important to remember that the early cancellation penalty fee only comes into effect once the Tenant has vacated the premises
and there is no longer a rental income. Should a replacement Tenant be found and a new Lease Agreement signed for the same period or longer, then there will be no financial loss to the landlord and the early cancellation penalty will fall away. Please keep in mind that should a suitable replacement Tenant be found, the current Tenant will still be held liable for the advertising cost associated with finding the replacement Tenant.
The early cancellation penalty does not include the deposit amount that would have been paid at the onset of the Lease Agreement. The deposit may only be utilized for any damages that may occur to the property and any outstanding monies owed in accordance to the Lease Agreement (utilities, arrears rental, body corporate fines etc).
The early cancellation fee will include any loss that the Landlord may incur due to loss of rental, any commission paid to an agency, and any advertising costs to find a replacement tenant. Should there be any damage to the property identified during the outgoing inspection, this would be charged separately against the damages deposit and dealt with in accordance with the Deposit clause in the Lease Agreement.
