Commercial Lease Agreements and the South African Consumer Protection Act (68 of 2008) (“CPA”).
Much confusion exists regarding whether the CPA applies to commercial lease agreements.
The CPA does apply to all commercial lease agreements entered into with a natural person or a juristic person if the annual turnover or asset base is less than R2 million per annum.
But it is important to note that it is a little more complicated than that and many people misinterpret the Act. So when reading the Act, remember the CPA will clearly indicate when a specific Section does not apply to a particular agreement that was entered into by a juristic person, irrespective of the turnover.
Does Section 14 of the CPA apply to a commercial lease agreement enter into by a juristic person?
“Expiry and renewal of fixed-term agreements
- (1) This section does not apply to transactions between juristic persons regardless of their annual turnover or asset value”.
A significant implication of the CPA on commercial lease agreements is unilateral, unreasonable, unjust and unfair contract terms and conditions.
The CPA addresses this between Sections 48 to 52.
Landlords should be careful not to assume that only the principle of signature will apply (in other words everybody signed and that is the end of it – not true) and that the court will enforce the agreement purely based on this principle. Traditionally the Court avoided interfering with the “letter of the contract”. Courts are now expected to give effect to the Act and to take cognizance of unreasonable, unjust or unfair contract terms and conditions.
Landlords under the Act (as a supplier) are now inter alia prohibited from entering into contracts that have unjust, unfair and unreasonable terms and conditions.
The legal principle that is receiving emphasis or terms in which tenants (consumers) are being requested to waive their rights and assume obligations and then waive responsibilities of the landlord.
Does the Landlord need to bring certain terms and conditions that are in the lease agreement to the tenant’s attention?
The CPA requires a Landlord, i.e. a service provider, to bring to the attention of the Tenant any term that purports an assumption of risk and liability to be taken by the Tenant or purports to limit the risk of liability of the Landlord or any other third party.
The Landlord further needs to bring to the attention of the Tenant any term or condition that indemnify the Landlord against any aspect or where the Tenant acknowledges a specific fact or an activity or facility that carries a specific risk.
Most commercial lease agreements have a typical standard clause which would limit the liability of Landlord with regard to damages that the Tenant can claim and normally indemnifies the Landlord against claims by third parties. Section 48(1) would actually apply to this sort of clause.
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