May a lessee cancel a lease when a lessor breaches?

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May a lessee cancel a lease when a lessor breaches?

Lessees often find themselves bound by lease agreements that are more favourable towards a lessor and which make it difficult for the lessee to terminate before the expiry of the lease agreement. Fortunately, the Consumer Protection Act 68 of 2008 (“CPA”) and the Rental Housing Act 50 of 1999 (“RHA”) provide possible remedies for lessees to cancel a lease agreement prematurely under certain circumstances.

Section 14 of the CPA allows for the lawful cancellation of a lease agreement at any time before the lease expiry date by giving 20 business days’ notice. In such a case, the lessor is entitled to charge the lessee a reasonable cancellation penalty in order to recover costs. In most cases, this amounts to two months’ worth of rent. Both parties must agree to the cancellation as well as the cancellation penalty and this should be regulated by the insertion of a cancellation clause in the lease agreement. However, if the two are not in agreement, or there is no cancellation clause in the lease agreement, the CPA or the RHA may provide a remedy for the lessee.

Where the lessor has failed to perform his obligations in ensuring that the leased property remains safe, habitable, and that repairs and maintenance, especially those affecting the lessee’s living conditions, are completed without delay, then he is in breach of the lease agreement and the lessee is within his right to terminate the agreement and will not be liable for a cancellation penalty. The lessee has to show that he has notified the lessor of the problem and the lessor failed to remedy the problem timeously.

Furthermore, the lessor is obliged to give the lessee undisturbed possession and occupation of the leased property. Where a lessee is deprived of or disturbed in the use or enjoyment of the leased property, either in whole or in part, the lessee may in appropriate circumstances be relieved of the obligation to pay rent, either in whole or in part. This applies not only where the interference with the lessee’s enjoyment of the leased property is the result of vis major but also where it is due to the lessor’s breach of contract, for example because the leased property is not fit for the purpose for which it was leased or because the performance rendered by the lessor is incomplete or partial (Thompson v Scholtz [1998] 4 All SA 526, 1999 (1) SA 232 (SCA) p. 247A-D).

All disputes of unfair practice may be referred to the Rental Housing Tribunal which was established by the RHA. The Tribunal may make a ruling to terminate any unfair practice, including but not limited to unacceptable living conditions, lack of maintenance and repairs; overcrowding and health matters; nuisances; reconstruction or refurbishment work as well as non-payment of rent and non-refund of deposit.

In terms of section 5(g) of the RHA, on expiration of the lease, the lessor may apply the lessee’s deposit and interest towards the payment of all amounts for which the lessee is liable under the said lease, including the reasonable cost of repairing damage to the property during the lease period and the cost of replacing lost keys and the balance of the deposit and interest, if any, must then be refunded to the lessee by the lessor not later than after 14 days of restoration of the property to the lessor.

Nothing in law restricts a lessee from cancelling a lease agreement prematurely, provided that he gives 20 days’ written notice. As a general principle, where the cancellation is occasioned by the lessee, the lessor will be entitled to charge a reasonable cancellation penalty. However, where the lessor’s breach is the cause of such cancellation, the lessee will not be liable for cancellation penalty and will only be required to pay the costs of repairs to the property and arrear rental, if any.