A tenant has the right to cancel their lease agreement early, but they must be aware of financial penalties. Picture: PxHer
From starting a new job in a new area to no longer being able to afford rent, there are a number of reasons a tenant may want to end a lease early.
So, before signing a new lease, make sure to check that it makes provision for early cancellation as per the Consumer Protection Act (CPA).
After all, this Act is intended to protect the rights of both landlords and tenants.
In the case of early lease termination, Jacqui Savage, national rentals manager for the Rawson Property Group, says that means protecting tenants’ rights to end a lease agreement that no longer serves them, while also protecting landlords’ rights to maintain a secure and stable investment.
Exactly how this is accomplished remains a common source of confusion, however. Thus, she shares the most frequent early cancellation questions received from both landlords and tenants.
Tenants are legally permitted to cancel their lease at any point, with 20 business days’ written notice.
“They may, however, have to pay a reasonable cancellation penalty for the privilege. The details of this penalty must be included in writing in the lease agreement and agreed to by all parties at the onset of the lease agreement.”
Savage says the CPA is very clear that the early cancellation penalty may not be so high that it discourages tenants from enacting their right to cancel the lease agreement. It is therefore very important for tenants to read and understand their early cancellation penalty before signing a lease agreement.
While regulations don’t specify exactly what is considered ‘reasonable’, various factors need to be looked at to determine what will be a reasonable penalty. This determination could be based on the remaining duration of the lease agreement, and whether it would be easy to find a replacement tenant?
It is important to note, though, that early cancellation penalties only come into effect once a tenant has vacated the premises and there is no longer rental income.
“If a new tenant is placed immediately, and a new lease agreement signed for the same period or longer, there would be no financial loss due to vacancy, so that part of the cancellation penalty would fall away.”
However, the tenant may still be held liable for advertising costs or placement fees incurred in the process of finding the new tenant.
Law firm Pagel Schulenburg, says the tenant may also be liable to pay the rental agent’s pro-rata fee.
“Under these circumstances, the landlord will need to prove that they attempted to mitigate their damages and took positive steps to find a new tenant. Generally, an amount equal to two months’ rental is awarded if the landlord is unable to find a replacement tenant.”
When it comes to terminating a month-to-month lease agreement, the RHA provides that either party wishing to cancel such a lease agreement can do so by giving at least one month’s written notice of its intention to cancel.
– Giving notice
Pagel Schulenburg advises that both landlords and tenants must provide proper written notice of their intent to terminate the lease early, as specified in the lease agreement or according to the provisions of the Rental Housing Act (Act 50 of 1999).
The notice period can vary depending on the circumstances and may be subject to negotiation between the parties involved. Tenants should bear in mind that failure to provide proper notice may result in financial penalties or legal consequences.
– Deposits
It is important to note that the landlord is required by law to invest the deposit in an interest-bearing account, with interest accrued being owed to the tenant. Landlords are required to return the tenant’s deposit within a reasonable time after the termination of the lease, Pagel Schulenburg states.
“The cost of any repairs the landlord has to make for damage caused by the tenant can be deducted from the deposit, as well as any other amounts still due and owing to the landlord. These damages must go beyond normal wear and tear and the landlord is not allowed to use a deposit for general maintenance or upkeep of the property.”
– Rental arrears and damages
Tenants are responsible for any outstanding rental arrears and damages caused to the property beyond normal wear and tear. It is essential for tenants to understand their obligations regarding rent payment until the lease termination date.
The firm adds: “Understanding early termination of lease agreements is crucial for both landlords and tenants in South Africa. By familiarising themselves with the rights and obligations associated with early termination, both parties can navigate potential disputes more effectively. Clear communication, adherence to notice requirements, and acting in good faith can contribute to a smoother termination process and help protect the interests of all involved.”
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