When a tenant wants to cancel before the lease expires?
Category Rentals
A question which often arises is "what happens when a tenant wants to cancel their lease before the expiry date?" The Consumer Protection Act has brought about greater protection for consumers including the ability to terminate fixed agreements on certain conditions.
This includes residential lease agreements and supersedes any clause in the lease which may prohibit the tenant from cancelling. That said, such cancellation does not come without consequences for the tenant. According to Seeff's legal expert in rentals, the tenant will still be liable for certain payments.
Cancellation in terms of the CPA
The right of the tenant to cancel the lease is provided in terms of Section 14 of the CPA (Consumer Protection Act). The tenant is entitled to cancel the lease despite any clause to the contrary in the lease agreement. In other words, the landlord can no longer include a clause aimed at preventing the tenant from terminating/cancelling the lease.
The tenant must provide 20 business days' notice of early cancellation of the lease. This effectively works out to a month's notice. It is important that the lease agreement includes a clause which sets out how the notice must be given, preferably in writing and not just a verbal or text message.
Payment obligations of the tenant
Tenants often mistakenly think that they can simply cancel the lease without any further payment obligations. The tenant in fact remains liable for payment of the rent for the notice period as well as any other outstanding rent which may apply.
Additionally, the landlord will also be entitled to claim "cancellation penalties or damages" as a result of the early cancellation. This would include the cost of sourcing and placing a new tenant, covering the rent for any periods that the property will stand vacant as well as all other costs incidental to the early cancellation.
Additionally, any damage caused to the premises which need to be repaired by the property owners/landlord will also be for the tenant to pay. The landlord is entitled to utilise the tenant's deposit to cover these costs/damages.
Importance of a watertight lease agreement and skilled rental agent
The matter of tenant cancellation is just one of many aspects which underscore the importance of a watertight lease agreement to protect the property owner/landlord against financial losses. By setting out what should happen in the event of early cancellation including what compensation would apply in terms of "penalties/damages" resulting from the early cancellation would ensure clarity and protection for both parties.
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Author: Gina Meintjes
