Page 23 - Nexia SAB&T Property & Tax Guide 2022

Some sections in the Act which will apply to lease agreements:
◆ Sections 22 and 40 of the Act state that it is the inherent duty of the landlord to
ensure the tenant understands the lease agreement, and to provide full disclosure and
information.
◆ The tenant is entitled to information in plain and understandable language.
◆ Most lease agreements are for a fixed period. Section 14 provides that the tenant may
arbitrarily terminate the lease by providing twenty working days written notice to the
landlord (for a lease entered into after 1 April 2011), subject to payment of reasonable
cancellation penalties.
◆ Where the CPA applies, a landlord can only terminate the lease if there was a material
breach and the tenant has not remedied the same within the specified period provided
for in the lease agreement.
◆ Section 14 however does not apply to transactions between juristic persons, regardless
of their annual turnover or asset value.
◆ Fixed lease agreements under the CPA have a maximum duration of twenty-four
months. After expiry of the agreement, the lease will continue on a month to month
basis unless a new agreement is signed. Should the landlord wish to terminate the
agreement upon its expiry, he must notify the tenant in writing not more than eighty
but not less than forty business days (before expiration of the agreement) of its
looming expiry. If the agreement is to be renewed, a notice of any material changes
that would apply would need to be provided to the tenant by the landlord within the
same time frame. Should the lease continue on a month to month basis after its expiry,
then the provisions of the Rental Housing Act will apply, and the landlord can cancel
the lease agreement by giving one calendar months’ notice, which is a notice that must
be given before the end of the month, to terminate the contract at the end of the next
month. Where there has been a material breach on the part of the tenant while the
lease is on a month to month basis, the CPA will not apply, and a shorter period of
demand prior to cancellation may be given.
◆ In summary, if two individuals enter into a lease agreement (commercial or residential),
the CPA will apply, including Section 14. If an individual as landlord and a juristic
person with assets or turnover of less than R2 million, as tenant, enter into a lease
agreement, the CPA will apply, including Section 14. However, if two juristic persons,
regardless of assets or turnover value, enter into a lease agreement, Section 14 of the
Act will not apply (the remaining provisions of the Act may apply where both parties are
juristic persons and the tenant as juristic person has assets or turnover value of less
than R2 million). Note that where the tenant as juristic person has assets or turnover
over R2 million, the CPA will not apply to the lease agreement at all.
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