How to ensure the correct documentation with defaulting tenants
What happens if tenants stop paying rent? How can a property owner legally demand payment? What does rental housing legislation require? The answers depend on the nature of the lease and the nature of the tenants.
Consumer Protection Act
The Consumer Protection Act 68 of 2008 (CPA) governs fixed-term agreements between persons. A lease agreement falls into this category. A landlord must give the tenant 20 business days’ notice to rectify any breaches with the lease agreement (e.g., late rental). If the tenant pays the amount owed within this time frame, the matter is resolved. If not, the landlord is entitled to terminate the lease agreement and seek new tenants – hopefully ones who will always pay their rent on time.
Rental housing is governed by more than one piece of legislation. The Rental Housing Act 50 of 1999, Rental Housing Amendment Act 35 of 2014, and Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (PIE) apply, along with the CPA. In determining the application of the CPA, there are two key factors to consider.
- Is the lease agreement for a fixed period?
This is fairly standard with lease agreements. The most common period is one year, but two years and six months are also found. If the lease is not a fixed-term agreement, it is known as a month-to-month lease agreement. The CPA does not apply to month-to-month leases and the landlord can give the defaulting tenants a seven-day letter of demand for the money.
However, this is not the same as eviction. The Rental Housing Act 1999 requires the landlord to give the tenants one calendar month’s notice to vacate the premises.
If the lease is for a fixed period, the CPA applies and the tenants must be allowed 20 business days to rectify the breach. Only if the breach is not rectified can the eviction process begin.
If the lease was for a fixed period but has since expired, and the tenants have remained in the property by mutual consent, this is considered a month-to-month lease agreement operating on the same terms as the original lease agreement. These terms will continue to apply to the month-to-month lease. CPA will not apply and the seven-day letter of demand can be used. When it comes to giving notice to leave the property, the notice period stated in the original lease applies. If no notice period is specified in the lease, a minimum of one calendar month’s notice is required.
- Are the tenants a natural person or a juristic person?
If they are a natural person the CPA applies and 20 business days’ notice is required.
If they are a juristic person then the process to follow depends on their size and value. If the annual turnover or asset value does not exceed R2 million the CPA applies, along with 20 business days’ notice. If turnover or value exceeds R2 million, CPA does not apply and a seven-day letter of demand can be issued.
The following infographic shows the process to follow:
Source: TPN Credit Bureau
For further information
Simon Dippenaar & Associates, Inc. is a Cape Town law firm of specialist eviction lawyers, now operating in Johannesburg and Durban, helping both landlords and tenants with the eviction process. Contact one of our eviction attorneys on 086 099 5146 or simon@sdlaw.co.za if you need advice on letters of demand or the eviction process.
Further reading:
- Practical tips for tenants and landlords from the Gauteng Rental Housing Tribunal
- Tenant red flags and how to avoid them
- Eviction rights and wrongs – does PIE apply to a guest house?
