Consumer Protection Act to have severe impact

Category Property News

The new Consumer Protection Act may have "severe implications" for landlords, developers and business owners, the SA Property Owners' Association (Sapoa) said on Wednesday. The association said sections of the Act had far-reaching implications for lease agreements for immovable property, chief executive officer Neil Gopal said in a statement. He explained that Section 14 of the Act for the property sector allows a tenant 20 business days to arbitrarily cancel a lease agreement and restricts the length of a property lease. "Our main contention is that property leases are not governed by Section 14 of the Act." Also under the Act, lease agreements now have a maximum duration of 24 months. After expiry, the lease will continue on a month-to-month basis, unless a new one 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," said Gopal. This would create uncertainty for the consumer, who would not know whether he or she could remain on the premises after expiry of the lease. "Businesses cannot afford to move every two years." According to sections 22 and 40 of the Act it is the 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... in their own handwriting that the contents of the lease agreement is understood up until we reach final resolve," Gopal suggested. The association had a "fruitful" meeting with the trade and industry department this week to seek clarity on some provisions of the Act. It would now put its case before the National Consumer Council. Gopal said until questions about the Act were resolved, property practitioners, rental agents and brokers should err on the side of caution regarding leases.