For landlords and tenants alike, the lease process of a residential unit can be a stressful time. Finding the right place, passing those grim credit checks, securing the deposit and finally moving into your next home is a process that few want to repeat year after year. Section 14 of the Consumer Protection Act to once-off or other private leases has caused much confusion for landlords, tenants and property practitioners since the Act was promulgated.

A recent case of Venter and Another v Els and Another concerned the early termination of a lease agreement, in terms of a clause in the agreement that made provision therefor. In this case, a husband and wife (“the Venters), who are both working as engineers, were considering immigrating to Australia. Seeing as the Venters were not sure whether the move would be permanent, they decided to rent out their residential house before making the final decision. The couple entered into a lease agreement with Mr. Els, for a period of three years. At the beginning of the third year of the lease period, Mr. Els approached the Venters and informed them that he was desirous of extending the lease beyond the three year period. At this stage, the Venters had already decided that their move to Australia would be permanent and that they wanted to sell their house in South Africa. 

This was conveyed to Mr. Els who then accepted that a three months’ notice period would be included in the further lease agreement which read as follows: 
“The Landlord shall be entitled to terminate this Agreement on 3 (three) months written notice to the tenant before the termination date” 

In furtherance of the Venters’ pursuit to sell the residential home, the property was duly marketed, whereafter it was sold to the purchasers. In terms of the sale agreement, the purchasers would have vacant occupation of the property on 1 April 2024, and the Venters therefore gave written notice to Mr. Els in accordance with the lease agreement during December 2023. 

Despite the provision in the lease agreement, Mr. Els argued that the Venters could not terminate the lease agreement because the lease agreement is a fixed-term agreement, subject to section 14(2) of the CPA. The parties were unable to reach mutual ground and the Venters then turned to court on an urgent basis, due to the fact that the purchasers had the right to vacant occupation on 1 April 2024. 

The court was required to determine the applicability of Section 14(2) of the CPA to residential lease agreements. As a point of departure, the court considered the purpose of the CPA which is enacted to inter alia: 

• promote a fair, accessible and sustainable marketplace for consumer products and services
• prohibit certain unfair marketing and business practices
• promote responsible consumer behaviour

The CPA seeks to prescribe certain standards and norms in order to promote the fair and responsible treatment of consumers in their business dealings in the marketplace. What the CPA does not set out to do, is destroy, distort or hamper sound business practices. 

Taking the above into account, the court held that it cannot be said that the bargaining power in this case was skewed in favour of the Venters or that Mr. Els was forced to agree to the fixed term agreement on a take-it-or-leave-it basis. It was Mr. Els who requested a renewal of the lease agreement for a period of 3 years and he was at all material times informed that the Venters intended to sell the property. 

The court further said that if section 14 of the CPA were to apply to fixed term lease agreements, it would only apply if the agreement was concluded in the ordinary course of business. The CPA does not define ordinary course of business and this concept has been the subject of many contentious debates regarding which transactions would qualify as being in the ordinary course of business. 

The National Consumer Tribunal in Doyle v Killeen and Others held that the legislature could not have intended for the CPA to apply to persons selling goods in once-off transactions which were distinct from the selling of goods as a continual enterprise. The Tribunal said further that an objective evaluation is required when considering the concept of ordinary course of business and set out relevant factors to consider when applying this test.

In the Venters’ case, the court came to the conclusion that a lease agreement concluded by lessors who do not rent out the property in the ordinary course of their business, is not subject to the provisions of the CPA.  It is however uncertain at what stage the repeated letting of a home by a homeowner would constitute being in the ordinary course of business. The court said on this point that each case must be evaluated within its own factual matrix and circumstances, and the court agreed with the reasoning of the Tribunal that an objective evaluation of all the facts and circumstances is necessary to determine whether a transaction is concluded in a supplier’s ordinary course of business. 

The Venters’ work full-time as engineers and did not lease out their property on a continual basis, nor to derive their income. The Venters leased out their primary residence in South Africa on a temporary basis, whilst determining whether their move to Australia was going to be permanent. 

The court decided in favour of the Venters and held that the 3 months’ written notice given to the Mr. Els in terms of the lease agreement validly cancels the lease agreement with effect on 31 March 2024. 

If you are unsure whether your agreement falls within the ambit of the CPA, contact our expert attorneys for an objective evaluation of your unique set of facts.