Here’s why tenants can be held liable for early cancellation damages
Lease agreements are usually entered into for a fixed period of time, such as for 12 months, and during this time it could very well happen that the circumstances of the tenant can change. In the case of a residential property, the tenant might be transferred to another city by his employer, and it could be necessary for the tenant to prematurely cancel the lease agreement.
So, how do we deal with early cancellation by a tenant? As always, an answer in law can never be a one-size-fits-all. In this regard we are happy to report that there is at least one set rule: A landlord would never have to suffer damages as a result of a tenant’s early cancellation of the lease agreement.
One of the things that has to be considered in determining which damages the landlord can claim from the tenant is if there is any specific legislation applicable to the lease agreement.
Section 14 of the Consumer Protection Act (CPA) makes provision for a consumer, in a fixed-term agreement, to terminate such agreement by giving the supplier 20 business days’ notice of cancellation. This would mean that a tenant in a fixed-term lease can cancel that lease agreement by giving the landlords the notice as referred to in the CPA. The majority of residential lease agreements will be governed by Section 14 of the CPA.
There are some exclusions though, for instance when the parties are juristic persons. This section only makes provision for a reasonable cancellation penalty that the landlord would be allowed to claim from the tenant in these cases.
This causes great confusion, though, since the perception is that the tenant can cancel the agreement without any consequence. This is, in fact, not correct and the tenant remains liable for the actual damages suffered due to the cancellation of the lease agreement. These damages will include loss of income for the period the landlord did not have a tenant, agent commission paid by the landlord and damage to the property. It is, however, of paramount importance that the lessor has a duty to mitigate his damages and will have to take positive action to secure a new tenant as soon as possible.
In lease agreements where section 14 of the CPA does not apply, the position would be exactly the same where the landlord would only be able to claim the actual damages suffered. This is, however, not governed by the CPA, but by the Conventional Penalties Act.
This article first appeared on SSLR Inc’s blog and is reproduced here with the kind permission of the author
Who is Cilna Steyn?
Cilna Steyn, MD of SSLR Inc, completed her LLB Degree at Unisa, after which she was admitted as an attorney in 2007. She co-founded Steyn & Steyn Attorneys, where she began specialising in evictions.
She regularly presents training sessions, where she advises groups of rental agents and private landlords on matters relating to landlord and tenant disputes and broader scope property law-related matters. She also acts on the panel of experts for the Law Society of South Africa’s Legal Education and Development. She presents seminars on behalf of LSSA: LEAD, educating attorneys nationally on eviction procedures and rental claims. She is one of the drafting attorneys of the TPN (Tenant Profile Network) Residential Lease Pack.
Cilna authored The Landlord’s Guide – Property Rental and Eviction in 2015 and regularly publishes articles in newspapers and peer-review magazines. She also appears on television and radio, participating in discussions relating to property law and, in particular, evictions. As the managing director she is dedicated to leading SSLR Inc in accordance with its core values.
Cilna is passionate about property and understands the pressures of being a landlord. Her attention to detail and knowledge of property law makes for efficient evictions.