New law to hit property market
Fin24

New law to hit property market

2011-01-30 22:10

Johannesburg - The widely debated Consumer Protection Act that comes into force on April 1 will give the property industry a headache.

It will affect buy-to-let investors in particular, as well as developers who sell property off plan.

Although legal experts believe that this legislation will be a welcome improvement on the existing consumer-protection measures, they have a problem with the fact that property-related contracts will be treated the same as contracts for ordinary trading commodities.

Schalk van der Merwe, property attorney for VFV Mseleku, said he was unable to see why the rules applicable to a cellphone contract could be used to regulate property lease contracts – or how the purchase of a toaster could be handled in the same manner as the purchase of a house worth R2m from a developer.

He said that, according to the new act and proposed regulations, a cellphone contract was a fixed-term contract that could not be entered into for more than two years.
 
At any stage during this period it could be terminated by the subscriber giving only 20 days’ notice.
 
The supplier would be able to cancel it only if there was substantial default on the part of the subscriber.

He said that someone who had bought leased property and arranged bank finance on the strength of the lease contract would be affected if the tenant could cancel at any stage.
 
Not only did this cause huge uncertainty in the property market, but it gave rise to the question of whether a bank would provide finance on this basis, he said.
 
Further problems that could arise were if the landlord – who is obliged to warn the tenant, two months before expiry of the lease, that the contract will end – forgets to warn the tenant.

He might then be saddled with a tenant who could stay on at last year’s rent as long as he wished.

A landlord cannot enter into a contract for longer than two years and, if the tenant wishes to cancel his rental contract early, he need only pay 10% of what he owes for the remainder of the lease period.
 
Van der Merwe reckoned that the property industry should receive at least partial exemption under the law, since legislation to protect tenants already existed – such as the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act.

- Sake24.com

For business news in Afrikaans, go to www.sake24.com.


Comments
  • Ewert van Eeden - 2011-01-31 08:10

    Funny the moaning and groaning now that the shoe is changing to the other foot. How many landlords doubles rent when initial contract is over or claim insurance on damages but never fix the damages or the most common trick delay repayment of deposit or never pay it back. Some at least use a false claim to do this others just ignore you. Its time they get their own back.

  • Errol - 2011-01-31 09:48

    So - the shoe will now be firmly on the other foot. Cell phone companies have always placed all the onus for their contracts on the consumer. Go read your contract, they're not even obliged to provide a service, just best effort and if you don't like it - tuff - you're locked in for two years (and If you forget to inform them, the contract just renews automatically). And let's not forget THE biggest "contract dons" there are - the armed response companies. 3 years min and there is no way in hell you can get that canceled. Well done - I think this is LONG overdue. I have a few contracts that will end as soon as this is in place.

  • cindy - 2011-01-31 10:15

    Does this new law apply to a lease signed in 2010 that still hase a year to go, or only to new contracts being signed after April 2011?

  • Umfubi - 2011-01-31 10:18

    I think I have bad news for you, Errol - I read that the Consumer Protection Act won't apply to existing contracts retroactively... I quite agree re the cellphone co's - they will get what has been coming to them for years. However, I do fear that this may well mark the end of the 'free cellphone' era - you can't expect them to hand you a freebie if you can cancel the contract at the drop of a hat.

  • Charls - 2011-01-31 10:55

    Yeeppeeeeh! im so happy the landlords are finally gon get what's coming to them.i was cheated out of my R 4000.deposit last year by Leoni Bothma in tzaneen beacause i gave notice on the 2nd of the month instead of the 1st.cow!

  • A.J - 2011-01-31 11:31

    Maybe this would interest you

  • SP @ Errol - 2011-01-31 11:47

    Errol, the reason why armed response and cell phone companies lock you in for a fixed period is because they supply the equipment (alarm system/cell phone) for free. Now you will have to buy these upfront. Then you can get the service on a month-by-month basis. You cannot expect everything in life for free.

  • Leon - 2011-01-31 11:52

    @Ewert. Dude don't genralise. I have several contracts in place and i don't screw my tennants as you claim. This will open me up for further abuse by non-paying runaway tenants. Sounds like you had a bad experience.

  • Bill Dixon - 2011-01-31 12:46

    Cell companies were told years ago during the negotiating of number portability to unbundle phones from service contracts, thus there should be no freebies. Phone should be handled as a HP agreement. Thus they have to give you price for contract with and without the phone. Property barons will no longer be able to tie you into long term contracts with 10% escalations annually. Now the opportunity is there to negotiate escalations more frequently with more mobility. Hurrah

  • Solo - 2011-01-31 13:51

    If a cell phone company gave me good service I would stay with them year after year. Unfortunately they give rubbish service and hence I am changing whenever I can.

  • Think about it - 2011-01-31 14:37

    Guys just stop and read carefully, you cannot just cancel a contract, you have to prove that the provider is at serious default on the conditions agreed upon. You cant just go cancel all your contracts and pay a 10% penalty, the provider is going to have to mess up badly and then you prove it in order to cancel. Its not a free escape route.

  • Dirk - 2011-01-31 16:15

    I agree with Leon, wait untill you are on the other side and tenants are just moving out or paying as they wish. But I can't wait to get out of my Cartrack contract!!!

  • Mike - 2011-01-31 23:10

    One thing that may not play into the hands of tenants. With property more of a risk, there will be fewer landlords offering property to rent = less supply, pushing prices up. Those landlords still in the game will be scrutinising ITC/TPN?EXPERIAN records so closely because they fear a risky tenant that many hopeful tenants may simply be turned away. What will this do to property prices - probably push them lower as property becomes a less attractive asset class - so may be easier for people to purchase instead of renting. If you follow property prices they are tracked at: http://housepricesouthafrica.wordpress.com/

  • Flabbio - 2011-02-01 09:19

    Will need to read up a bit. Must be a mistake. You can't penalise the owner indefinitely for not giving tenant 2 months notice that lease will expire when tenant has a copy of the lease. There has to be a specific time frame attached like previous lease period or something similar. If not, the law is a joke and ultimately SARS loses out in terms of revenue collection.

  • Krazy - 2011-02-01 16:46

    Going to put a heavy potential burden on landlords and will make their lives even more problematic with the PIE act. More rights for tenants to abuse who can cancel lease and stay on with impunity while landlord battles to get rent and eviction.ANC destroying economy with stupid laws.

  • Alan - 2011-02-02 09:51

    Ewert - a skewed look at landlords. If the landlord doubles the rent you can always find another place. That is free enterprise. If the premises are not up to scratch - let the landlord know you do not intend renewing the lease as there are items requiring repair. If a landlord plays tricks with the deposit he can be sued for it. Mostly Small Claims Court so its easy. Your take is very slanted.

  • Afropreneur - 2011-02-02 16:10

    @Think about it - Actually, consumers CAN cancel fixed term contracts WITHOUT having to prove ANY supplier default - AND without necessarily having to pay ANY penalty (let alone a 10% one). Free copies of the CPA can be downloaded online (just Google for it). Or check here for a summary: http://www.evergrow.co.za/1.5/ConsumerProtectionAct.htm.

  • Andre - 2011-02-04 08:57

    This levels the playing fields between landlord and Tenant. When tenats sign a five year lease they are actually creating a potential liability for the full five years, if their business goes belly up, they are still liable for the full rental liability extending into the future. This act diminishes the potential liability and shoudl be embraced as constructive financial planning. The landlords with ten year leases have had it to good for to long, it will also have the effect of making commercial property more affordable, as they cannot just be sold on yield alone, and thsi will create a more symbiotic relationship between the landlords and tenants!

  • TonyHarris - 2011-02-07 19:17

    The landlords are the ones who have always (going back to the 60's in my case) been the ones who have had to suffer when the tenants ruined the place and failed to pay. The landlord has invested large amounts and the tenants are not always the problem, depending upon who your tenants are. This new law is having a devastating impact on the landlord. It seems to me that the defaulting tenants now obtain more rights. Somehow it is my perception that whatever is bad (he who has nothing has the right to destroy that which belongs to others) is being protected, through human rights and Acts.

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