You may find yourself in a predicament where you enter into a lease agreement and the rental space is not conducive to your living expectations. If a new opportunity arises and a new, better place opens, may you give notice?

Would cancelling a contract prematurely, boil down to repudiation and therefore a breach of contract? Repudiation in terms of the common law is defined as the intimation by word or conduct, without lawful excuse, that all or some of the obligations that arise from the contract will not be performed.

As it happens often, landlords and agents try to allege that early cancellations are a breach of contract, without referring to the Consumer Protection Act (hereafter referred to as “the CPA”). In terms of the CPA, tenants have the right to cancel their leases, if they fulfill the cancellation criteria set out in the lease agreement.

The landlord is entitled, in terms regulation 5(2) of the CPA, to hold the tenant liable for what is referred to as a ‘reasonable penalty’ fee which is not intended to penalize the tenant, but rather aid the landlord to recoup any losses he may have suffered due to the early cancellation. The regulation includes the following factors that may be considered:

• the amount that was still owed under the remainder of the period;
• the value of the transaction that was cancelled;
• the initial agreed duration period;
• the length of notice of the cancellation;
• the potential of finding another tenant; and
• the general practice relevant to its industry. These losses include advertising costs, rental costs as well as credit check costs for prospective new tenants.

Therefore, a landlord is only entitled to recover his actual losses by relying on  an early cancellation penalty clause in the lease agreement.

Section 14 of the CPA is very important to tenants, and it is important for same to understand the rights afforded by this section. A tenant may in accordance with this section cancel the lease agreement by giving the landlord 20 business days’ notice, without the need to prove any breach of the agreement. Therefore, the tenant would remain liable for the amounts owed in terms of the relevant agreement up to the date of cancellation, but not up to the end date of the contract under the relevant agreement.

To conclude, it is of great importance to know your rights as a tenant to a lease agreement, especially when it comes to cancellation clauses.