Not every consumer is protected but if you are in the business of rental, be aware

Background

Mr and Mrs Venter (the Landlords) owned the property in question and had concluded a three-year extension of their initial lease agreement with Mr Els (the Tenant). The initial lease agreement ran from 1 January 2021 to 31 December 2023, while the second (which informed the dispute) ran from 1 January 2024 to 31 December 2026.

The Landlords decided to sell the relevant property and relocate to Australia. They informed the Tenant of their intended immigration to Australia and issued him with a three-month written notice in terms of the second agreement therein advising him of their intention to terminate the second agreement. Initially, the Tenant accepted the termination notice but later changed tact by holding that the termination was unlawful and invalid due to the CPA's applicability to the second agreement as a fixed-term consumer agreement. In addition, the Tenant contended that there was 'no material breach of the lease agreement', rendering the purported termination of the second agreement by the Landlords unlawful and invalid.

The Landlord instituted urgent proceedings in the High Court seeking a declaratory order confirming inter alia that (i) the second agreement was valid; (ii) notice of the termination of the second agreement was validly given; (iii) the CPA did not apply to the second agreement and (iv) the Tenant should vacate the Property.

The High Court found in favour of the Landlords and ruled that the CPA did not apply to the second agreement, declaring it as well as the termination notice given in terms of it, valid. Impermissibly however, the High Court set a date by which the Tenant was to vacate the property, which decision was rightly overturned by the SCA on appeal.

The issue before the SCA

The SCA was called upon to consider the provisions of the CPA, particularly their underlying purpose in order to determine whether in the given context, the CPA found application.

The Court's decision 

In its ruling, the SCA confirmed that the CPA applies only where a rental agreement is concluded “in the ordinary course of business.”

'Once off' or 'temporary rentals' by private individuals do not meet this standard. The Landlords in this instance were not in the business of letting property or engaging in any trade or business when they concluded the second agreement with the Tenant. On the contrary, they were engineers and the second agreement was a means to protect their asset (the rental property) while they were overseas and contemplating their relocation from South Africa.

Axiomatically, the Tenant's reliance on section 14 of the CPA was misplaced as the SCA found that the Tenant and Landlords did not fit into the definitions of what constitutes a "supplier" and a "consumer" for the purposes of the CPA. Further, that the second agreement was not an agreement that was concluded in the course of any trade or business, let alone in the ordinary course of business as required by the CPA.  Simply put, the SCA found that the CPA was only applicable to residential lease agreements where services were continually marketed for consideration to consumers in the ordinary course of business of the lessor or an individual acting on their behalf.

The SCA further noted that the second agreement was not a fixed-term agreement as contemplated by section 14(2)(a) of the CPA, highlighting that the 36-month lease agreement ( the first and second agreements) exceeded the 24-month maximum for fixed-term consumer agreements under Regulation 5(1) of the CPA's Regulation, thereby rendering the second agreement outside the scope of protection afforded by section 14 of the CPA.

Pertinently, the SCA set aside the eviction order granted by the High Court as it was granted outside the regulatory framework of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (PIE). The cart was put before the horse in this respect in that the Tenant, at the time of the impugned eviction order, was not an unlawful occupier for purposes of PIE.

Key take-aways

This case clearly canvasses that the CPA will find application in rental agreements where these types of agreement are concluded by landlords in their “ordinary course of business" and only in instances where they are in the business of continually marketing rental properties. 'Once-off' or transitional letting of property by private homeowners falls outside the ambit of the CPA, rendering any CPA reliance by tenants in such instances impotent from the starting blocks.