Court ruling: The applicability of the Consumer Protection Act in rental agreements

In the recently decided case of Magic Vending (Pty) Ltd vs N Tambwe and two other occupants of a rental house in Wynberg, the Western Cape Division of the High Court was asked to rule on a) whether the Consumer Protection Act applied to the case in question and b) whether the enforcement of the forfeiture clause contained in clause 14 of the lease agreement was contrary to public policy.

The ins and outs of subject to bond approval clauses

The facts of the case

The applicant, Magic Vending (Pty) Ltd, applied in terms of the Prevention of Illegal Eviction Act 19 of 1998 (PIE) for the respondent, N Tambwe, to be evicted from the property. 

Ms Tambwe had occupied the property for many years, first in terms of an oral agreement and later in accordance with a lease agreement concluded in 2014. While the lease subsequently expired, neither party cancelled it, with the result that it continued on a month-to-month basis in terms of the Rental Housing Act.

Unfortunately, during this time, Ms Tambwe fell deeply into arrears. After being notified and failing to remedy the arrears, she was sent notice of termination of the lease based on clause 14 of the signed lease agreement. This clause provided for immediate termination of the lease agreement in the event that the lessee failed to pay any rent on the due date or failed to comply with any of any of the other terms. It further stipulated that in the event of the Consumer Protection Act being applicable, Magic Vending (Pty) Ltd would have right of recourse in terms of the provisions of the Act.

The court’s decision

In terms of the first issue brought before the court – whether the Consumer Protection Act applied to the matter at hand – the presiding Judge found that the Act applied for the following reasons:

  • Section 6(1) of the Act specifically applies to services, with service being defined by Section 1 of the Act to include inter-alia; “access to or use of any premises or other property in terms of a rental…”
  • Section 14 (2)(d) further applies to fixed lease agreements and agreements that have expired (and are now month to month), but subsequently come into being by virtue of this section. 

Regarding the second issue – whether the enforcement of the forfeiture clause contained in clause 14 of the lease agreement was contrary to public policy – the court found that it did not offend against the Consumer Protection Act, adding that forfeiture clauses are and have historically been, common features of lease agreements and that there is nothing lacking in good faith about their incorporation. 

The Judge also mentioned that had it been the legislative intention to override the rich body of legal theory that allows for the enforcement of forfeiture clauses, with the court having no authority to remedy a debt caused as a result of them, he would have expected the statute to declare this unambiguously. 

The Court added that the forfeiture clause was not constitutionally incompatible, with the Judge deeming the Provisions of the Consumer Protection Act to be non-unconscionable – in other words, they do not favour the party that holds greater bargaining power over the other.

Finally, making use of the forfeiture clause to cancel the contract did not result in the lessee being immediately evicted from the premise. Instead, the eviction was only permitted when Magic Vending (Pty) Ltd put forward an application in terms of the PIE Act.

As a result of the above findings, the respondent, together with her children who were occupying the property with her, were directed to vacate the premises in Wynberg on or before the 18th of January 2021 and ordered to pay the applicant’s cost of suit.

The Judge further ruled that should the respondent not comply with the order, the sheriff would evict her and those residing with her, together with their personal effects, from the premises.

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Court ruling: The applicability of the Consumer Protection Act in rental agreements

In the recently decided case of Magic Vending (Pty) Ltd vs N Tambwe and two other occupants of a rental house in Wynberg, the Western Cape Division of the High Court was asked to rule on a) whether the Consumer Protection Act applied to the case in question and b) whether the enforcement of the forfeiture clause contained in clause 14 of the lease agreement was contrary to public policy.

The ins and outs of subject to bond approval clauses

The facts of the case

The applicant, Magic Vending (Pty) Ltd, applied in terms of the Prevention of Illegal Eviction Act 19 of 1998 (PIE) for the respondent, N Tambwe, to be evicted from the property. 

Ms Tambwe had occupied the property for many years, first in terms of an oral agreement and later in accordance with a lease agreement concluded in 2014. While the lease subsequently expired, neither party cancelled it, with the result that it continued on a month-to-month basis in terms of the Rental Housing Act.

Unfortunately, during this time, Ms Tambwe fell deeply into arrears. After being notified and failing to remedy the arrears, she was sent notice of termination of the lease based on clause 14 of the signed lease agreement. This clause provided for immediate termination of the lease agreement in the event that the lessee failed to pay any rent on the due date or failed to comply with any of any of the other terms. It further stipulated that in the event of the Consumer Protection Act being applicable, Magic Vending (Pty) Ltd would have right of recourse in terms of the provisions of the Act.

The court’s decision

In terms of the first issue brought before the court – whether the Consumer Protection Act applied to the matter at hand – the presiding Judge found that the Act applied for the following reasons:

  • Section 6(1) of the Act specifically applies to services, with service being defined by Section 1 of the Act to include inter-alia; “access to or use of any premises or other property in terms of a rental…”
  • Section 14 (2)(d) further applies to fixed lease agreements and agreements that have expired (and are now month to month), but subsequently come into being by virtue of this section. 

Regarding the second issue – whether the enforcement of the forfeiture clause contained in clause 14 of the lease agreement was contrary to public policy – the court found that it did not offend against the Consumer Protection Act, adding that forfeiture clauses are and have historically been, common features of lease agreements and that there is nothing lacking in good faith about their incorporation. 

The Judge also mentioned that had it been the legislative intention to override the rich body of legal theory that allows for the enforcement of forfeiture clauses, with the court having no authority to remedy a debt caused as a result of them, he would have expected the statute to declare this unambiguously. 

The Court added that the forfeiture clause was not constitutionally incompatible, with the Judge deeming the Provisions of the Consumer Protection Act to be non-unconscionable – in other words, they do not favour the party that holds greater bargaining power over the other.

Finally, making use of the forfeiture clause to cancel the contract did not result in the lessee being immediately evicted from the premise. Instead, the eviction was only permitted when Magic Vending (Pty) Ltd put forward an application in terms of the PIE Act.

As a result of the above findings, the respondent, together with her children who were occupying the property with her, were directed to vacate the premises in Wynberg on or before the 18th of January 2021 and ordered to pay the applicant’s cost of suit.

The Judge further ruled that should the respondent not comply with the order, the sheriff would evict her and those residing with her, together with their personal effects, from the premises.

Follow Snymans on Facebook for more legal information, tips and news about property.