“SAPOA has identified sections of the CPA, and associated regulations, as having far-reaching changes to lease agreements for immovable property as we know it,” says Neil Gopal, CEO of SAPOA. “The new CPA may have severe implications for landlords, developers and business owners”. It is for this reason that SAPOA met officials from the DTI to seek clarity on some provisions of the CPA.

“Our meeting with the DTI has been fruitful and we are to now meet with the National Consumer Council which will now hear our case,” says Gopal. In terms of section 96 of the CPA, the National Consumer Commission is the responsible institution for, amongst other things, providing guidance to the public by issuing non-binding opinions on the interpretation of any provision of the CPA.

Until these questions about the CPA have been resolved, property practitioners, rental agents and brokers have been urged to err on the side of caution until questions regarding property leases and the new Consumer Protection Act (CPA) have been resolved.

“SAPOA fully supports additional protection for consumers,” explains Gopal.

“As the same consumer provisions have been implemented across all industries, without knowing the full effect that this will have on each industry, this could result in unintended and unwelcome consequences for the property industry. However, the positive response we have received from the DTI bodes well,” says Gopal

These consequences of Section 14 of the CPA for the property sector, points out Gopal, include allowing a tenant 20 business days to arbitrarily cancel a lease agreement and restricting the length of a property lease.

“Our main contention is that property leases are not governed by Section 14 of the Act” says Gopal. “SAPOA again raised these with the Department of Trade and Industry today, and had a very fruitful discussion”.

Under the CPA, lease agreements now have a maximum duration of 24 months. After expiry of the lease agreement, the lease will continue on a month to month basis, unless a new lease is signed. “Banks will not give credit to a consumer to start up their business if their lease agreement with the lessor is for this limited two year period as two years is insufficient time to enable the consumer to recover start-up costs for its business,” explains Gopal.

He adds that it will also create uncertainty for the consumer, who will now not know whether it could remain on the leased premises after the expiry of the lease agreement. “Businesses cannot afford to have to move every two years,” says Gopal.

Section 22 and 40 of the Act state that it is the inherent duty of the landlord to ensure the tenant understands the lease agreement – this opens the door for tenants to claim they did not understand the agreement or that they were forced or influenced to sign. “We propose that special provision is made whereby the tenant writes out the words, in their own handwriting, that the contents of the lease agreement is understood, up until we reach final resolve with the DTI on the CPA” notes Gopal. The DTI is not opposed to this suggestion.

The above effects, explains Gopal, will be felt by the property owners and buy-to-let investors who will now be uncertain of their rental income, their bond repayment shortfalls and their ability to use lease agreements as collateral security for loans.

SAPOA has also arranged to meet with the National Consumer Commission to resolve the abovementioned issues.