In order for the Consumer Protection Act 68 of 2008 “CPA” to apply to a lease agreement, the lessee must qualify as a consumer, and the lessor must qualify as a supplier as defined in theCPA. The issue that will be focused on is whether a lessor of residential premises qualifies as a supplier under section 1 of the CPA. The CPA applies to a lessor if he or she meets the requirements of being a supplier who provides services in the supplier’s “ordinary course of business”. The transaction of leasing premises is expressly included in the CPA definition of services, and as a result it may be subject to the protective remedies provided for in the CPA .
One such protective remedy is found in section 14 of the CPA which allows the lessee to cancel a fixed-term lease contract at any time by giving the lessor 20 business days’ notice. It is understandable why lessors are concerned as to whether their lease agreements are subject to the CPA as the CPA provides for drastic inroads into the average lease agreement and the consequences that flow from it.
Whether or not a lessor of residential premises is acting “in the ordinary course of his or her business” for the purposes of the CPA has been the main cause of the uncertainty, as there is no judicial authority on the interpretation of this phrase in the context of the CPA, nor have there been any judgments from the National Consumer Tribunal on this subject.
The uncertainty is especially prominent in cases where the lessor has not previously leased the residential premises, if it is a once-off lease, if the lessor is only renting the premises as an intermediate arrangement prior to selling such premises, or the lessor does not lease any other premises (or a combination thereof). For convenience sake the afore mentioned class of lease transactions will be referred to as “Basic Residential Leases”.
There are two separate academic opinions as to whether the CPA will apply to Basic Residential Leases. Some academics are proponents of the view that the CPA will apply to all such leases of residential properties between natural persons. This view seeks to uphold the rights of the lessee by affording lessees protection against unfair practices by lessors.
There is no reason why a lessor, leasing in terms of Basic Residential Leases, will not act unfairly towards the lessee, and therefore it can be argued that such a lessee should be afforded the protection of the CPA. Section 2 of the CPA states that the CPA must be interpreted in a manner which gives effect to its purposes which include the promotion of fair business practices, the protection of consumers from unconscionable, unfair, unreasonable, unjust, and improper trade practices (see section 3 of theCPA).
Interpreting the phrase “in the ordinary course of business” in light of the purposes of the CPA, one could make an argument for a wide interpretation of the phrase which allows the inclusion of lessors of basic residential leases as this view would be in accordance with the purposes of the CPA.
This view is further supported by the recent judgment by the Supreme Court of Appeal in National Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SCA. The court held that the proper approach to statutory interpretation (and all legal documents) is to ascertain the meaning of the words used in the legislation (rather than to seek to ascertain the intention of the legislature). The SCA held that the inevitable starting point would be the language of the provision itself based on the ordinary rules of syntax and grammar, however, from the outset the language must be considered together with the context.
Neither the language nor the context will be dominant over the other, as words bear several different meanings depending on the specific context in which they are used. With regard to context, the purpose of the legislation will play an important role. Based on this approach to interpreting the CPA, it is recommended that a lessor should ensure his or her compliance with the CPA in order to avoid the harsh consequences that might flow from ignoring the CPA.
The opposing view is that the phrase “in the ordinary course of business’” must be interpreted to exclude lessors leasing under Basic Residential Leases. This view accords with the rule of statutory interpretation which requires statute to be interpreted to give effect to the intention of the legislature.
The argument is that on interpretation of the CPA, the phrase “in the ordinary course of business” serves to exclude Basic Residential Leases as they cannot be intended by the legislature to be “in the ordinary course of business” of such a lessor. The fact is that there is no judgment in favour of an interpretation of the CPA for either the exclusion from or the inclusion of Basic Residential Leases in the CPA.
It would be advisable for all lessors of residential premises (including those who transact in basic residential leases) to be cautious and rather take note of the CPA when entering into lease agreements as the consequences of not adhering to the CPA could be even more detrimental to the lessor than to comply with the CPA. Adherence to the CPA is advised until this matter is finally settled by the courts, the National Consumer Tribunal or the legislature.