CPA could put squeeze on landlords
The new CPA (Consumer Protection Act) poses many benefits to the South African public, however, the act itself does enforce legislation that could negatively affect landlords and property managers earning a living in the rental market.
Michelle Dickens, Managing Director of TPN (Tenant Profile Network), a specialist property credit bureau and developer of the industry’s first rental payment profile, strongly advises property managers and landlords to seek legal advice when it comes to interpreting the language of the CPA. "The CPA, while very positive for consumers does pose concerns for those who have invested in the property rental market. Many aspects of the act remain unclear and businesses need to empower themselves through knowledge."
What is clear, a rental agreement is specifically defined as a service in the CPA and tenants who contract in their personal capacity or juristic capacity below a threshold still to be determined will enjoy the protection of the CPA.
Property Legal Expert and founder of Marlon Shevelew and Associates, Marlon Shevelew believes that the act will have a strong impact on the rental market. "Though the act affords great protection to consumers, it will introduce uncontrolled and seemingly unfair rights for tenants.
In many instances tenants will now be able to get out of lease agreements at the property owner’s and managing agent’s expense. It will also empower them to simultaneously place added obligations and additional burdens such as extra expenses and legal restraints on Landlords and managing agents," says Shevelew.
Shevelew advises property managers and landlords to be aware of the following:
- The act contains various sections which are unclear if they apply to rental industry. This makes it virtually impossible for landlords and property managers to discern would be transgressions of the CPA.
- Landlords and Property Managers have to ensure that all their documentation i.e. lease agreements are in plain and understandable language to comply with section 22 of the CPA.
- The act introduces constraints on direct marketing and has an ambiguous definition on discrimination. This will make it more difficult to run rental businesses by virtue of these stipulations.
The CPA will affect the rental industry in a number of ways. Shevelew says, "Section 14 of the Act, amongst others, clearly gives tenants rights to terminate fixed terms agreements on 20 business days’ notice. The landlord or managing agent can hold the tenant liable for the rent up until the cancellation date and a reasonable cancellation fee. The concern is the determination of what a reasonable cancellation fee is, as possibly will not include any future unpaid rent until a new suitable tenant is found for the property.
"Section 14 also affords the tenant a 20 business day period to remedy any breach of agreement. This will certainly delay the landlord or managing agent’s ability to proceed with cancelling any contract or legal action prior to this 20 business day remedy," he says.
"Compounding this is the inherent right of tenants to raise defenses of discrimination, an unclearly worded lease agreement and others to guard themselves against the relief that a Landlord might need to terminate a lease or evict a tenant. The downside is that property owners and buy to let investors will be uncertain of their rental income, their bond repayment shortfall and their ability to use a lease agreement as collateral security for a bank loan, to mention a few."