A glance at the Rental Housing Amendment Act of 2014: clumsy & inflexible but overlooked

Introduction

The Rental Housing Amendment Act of 2014 (“the Amendment Act”) has been assented to and is due to commence on a proclamation by the President. In the KZN region alone, the Ethekwini Municipality owns and lets 7 640 rental-housing units. Furthermore, the Msunduzi Municipality in the PMB region has found itself facing a large-scale unfair practice charge, a charge that will carry a 2-year imprisonment sentence or a fine, or both. In brief, the Amendment Act will result in a significant shift in risk towards the Landlord.

Formalities

The general common law position does not require a lease agreement to be in writing. Instead, the contracting parties are free to decide whether the lease is reduced to writing as a validity requirement or merely for convenience and the common law places a burden on the Landlord to disprove the latter. The Rental Housing Act of 1999 maintains this position in stating a lease need not be in writing. However, the Amendment Act appears ex facie to change this position. Section 5(1) of the Amendment Act obliges Landlords to reduce the lease agreement to writing, therefore it appears to be a requirement that the lease must be in writing. However, it is submitted that this is not a validity requirement but rather a consumer protection mechanism. Although, it is odd that the legislature decided to substitute rather than simply add to the previous provision, which provided that a lease need not be in writing because it can easily create a misconception that a lease needs to be in writing to be valid.

Compatibility with ECTA

ECTA has the potential to undermine this provision. ECTA satisfies the requirement, by operation of law, instructing a document to be in writing. Therefore this provision is satisfied if the material information of a lease is in the form of a data message. Although all material terms are required to form part of the written lease agreement, ECTA allows the material terms of a lease to be spread across a number of media in a sporadic format including but not limited to, email, WhatsApp and SMS. Making the informative purpose of the provision somewhat circumvented by using this confusing tactic. Interestingly. ECTA leaves the back door open for Lessor’s to escape criminal prosecution and rely on the above communication media instead of reducing the agreement to a single document.

Existing lease agreements

The Amendment Act is completely silent on its impact on existing lease agreements. Section 21 simply provides for a 6 month grace period commencing from the date upon which the Amendment Act comes into operation. However, a large degree of uncertainty remains. How will a landlord, 6 months into a 1-year lease, be required to change the terms of an existing lease agreement? May a landlord do so unilaterally without engaging the tenant? Is a new lease created ex-lege with new terms? What if the existing lease agreement favours the tenant? Can the Tenant or Landlord resile from the lease on the basis of this amendment? Should more onerous provisions be permitted in a manner similar to the Companies Act of 2008?

Definition of dwelling?

A dwelling is defined to include a garage and a shack, what complicates this definition further is the requirement to maintain the dwelling for suitable living purposes. The question is, can a garage or shack ever be considered suitable for living purposes??

In closing, the Amendment Act is, in essence, a good development towards protecting vulnerable tenants, however, clumsy definitions and inflexible application make for a difficult rental housing market in the future.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s