Article Courtesy of STBB
Last week, the Supreme Court of Appeal (‘the SCA’) delivered a significant judgment in the context of residential lease agreements and the Consumer Protection Act (‘the CPA’). In Els v Venter, the SCA definitively confirmed that the CPA does not apply to ‘once-off’ residential leases concluded by private individuals who are not in the business of letting property – providing much-needed clarity to tenants and landlords alike.
In this case, a married couple (‘the respondents’), who had emigrated to Australia in 2018, leased their former primary residence in Stellenbosch to the appellant. On
19th December 2023, the respondents sold the property. Days later, under a clause in a subsequent lease, they served a three-month notice of termination on the appellant to vacate the property by 31st March 2024. Disputing the notice, the appellant contended that the lease was a fixed-term consumer agreement that fell within the ambit of the CPA. Under this view, the lease could only be validly cancelled by the supplier – the landlords – for a material breach, per section 14(2)(b)(ii) of the CPA.
The SCA, however, disagreed with this argument. In analysing the scope of the CPA, the Court drew a clear distinction between the scenario where a landlord leases a property as a ‘once-off’ transaction and the instance where they are in the business of letting property. Interpreting the definition of ‘the ordinary course of business’, the SCA confirmed that ‘business’ means ‘the continual marketing of any goods or services’, including the use of premises for rental, under section 1 of the CPA. As such, a transaction which forms part of the ‘normal and routine day-to-day operations consistent with…past practices and customs’ occurs within the ordinary course of business.
On the facts, the SCA found that the respondents were private individuals who leased their Stellenbosch home as a once-off transaction – not ‘suppliers’ leasing the property in the ordinary course of business. As a result, the lease did not constitute a fixed-term consumer agreement and the statutory protections offered by the CPA therefore did not apply. The termination notice was accordingly valid.
For David Thompson, STBB Director and Head of Gauteng’s Litigation department, the ruling ‘highlights the sensitivity around [the] criticism’ that the CPA should not apply to residential property. Commenting on the court’s critical distinction between ‘once-off’ residential lease agreements and leasing in the ordinary course of business, Thompson emphasises that determining whether the CPA applies to a lease requires an objective evaluation of the transaction. If, for instance, the property is leased continually and is ‘marketed for consideration to consumers,’ the arrangement ‘will be construed as leasing in the ordinary course of business…even if the function of leasing is not the landlord’s primary vocation,’ remarks the experienced litigator.
Importantly, the Court reaffirmed that the CPA’s underlying purpose is to protect vulnerable, low-income consumers from unfair and unconscionable business practices and misleading or deceptive conduct – not to give better-resourced tenants greater leverage. In this particular case, the appellant – a respected economist – held equal bargaining power as the respondents.
In addition to clarifying the scope of the CPA, the ruling reinforces an important legal principle in the context of residential leasing. ‘No one may be evicted from their home,’ says Thompson, ‘unless they are held to be unlawful occupiers and provided that the correct procedure, as required in terms of the PIE Act, is followed when obtaining an eviction order.’ Notwithstanding that the CPA did not apply to the lease agreement, ‘the eviction order was granted prematurely prior to the appellant being an unlawful occupier, and [it] was set aside,’ notes Thompson.
By drawing a clear line between once-off leases and leasing activity that occurs within a landlord’s ordinary course of business, the judgment provides much-need clarity on when the CPA applies to residential lease agreements. For tenants, landlords, and estate agents, the ruling is a timely reminder to carefully confirm if and when the CPA regulates a leasing transaction and to ensure that the lease agreement is clear, comprehensive, and drafted accordingly.
In need of expert legal guidance? Contact our specialist team of property and litigation attorneys at info@stbb.co.za.
