Termination of a lease agreement
12 Jun 2023
The relationship between landlords and tenants is of utmost importance, requiring a clear understanding of their respective responsibilities, particularly when it comes to terminating a lease agreement before it is scheduled end. Various reasons can prompt tenants to terminate their lease early, such as the financial strain caused by the COVID-19 pandemic, which resulted in many people being unable to afford their rent.
In order to determine whether a lease agreement can be terminated, it is crucial to review the terms outlined in the contract between the landlord and the tenant. Additionally, it is necessary to consider relevant legislation, such as the Rental Housing Act 50 of 1999 for residential leases and the Consumer Protection Act 68 of 2008, which applies to both residential and, in some cases, commercial leases. The principles of common law may also come into play when interpreting the lease agreement.
Under the Consumer Protection Act, section 14 allows tenants to terminate the agreement by providing the lessor with a written notice of 20 business days. Regardless of the reason for termination, the tenant remains liable to the lessor for the obligations stated in the fixed-term lease agreement.
While tenants have the right to cancel a lease agreement, landlords have the right to impose a reasonable cancellation fee and claim any outstanding amounts owed under the lease after the lessee exercises their right to early cancellation.
According to Regulation 5(2) of the Consumer Protection Act, the penalty charged by the lessor should not exceed a reasonable amount, taking into account factors such as the remaining amount due for the period, the value of the transaction up until cancellation, the initial duration agreed upon, the length of notice provided, the landlord’s potential to find another tenant, and industry practices.
When a lease is terminated early, the lessor may charge the lessee for expenses related to credit checks for potential replacement tenants, advertising costs and the remaining rental amount. However, the determination of penalty fees can only be made once a new tenant has been secured, as all calculations must be considered to ascertain the costs incurred by the landlord due to the tenant’s early termination.
Lessees have the right to terminate the agreement with 20 business days’ notice if the lessor fails to comply with the provisions of the lease agreement and does not rectify the breach despite being requested to do so. However, the breach must not be considered to be materially unfair practice.
Lease agreements can also be cancelled if either the lessor or the lessee fails to fulfill their obligations as outlined in the lease. In a specific case, Vela v Dos Santos, the court ruled that a lessee had the right to cancel a lease agreement due to a material breach committed by the lessor. The lessee claimed a refund of the rental amount paid, which the lessor refused to provide, leading to a legal dispute.
In conclusion, both landlords and tenants have rights and obligations within a lease agreement, and it is crucial to understand the potential consequences of not adhering to them. Incorrectly cancelling a lease agreement can lead to financial burdens. To ensure proper guidance in such matters, it is advisable to consult an attorney.
For any assistance, contact an attorney at SchoemanLaw.
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