Q&A – The renter cancelled the lease before she moved in, do I pay back the deposit?

Q: Dear REImag team 

I have a tenant who saw my property online and she sent her aunt to view the place on her behalf since she was staying in Cape Town and my apartment is in Pretoria. The aunt said she liked the place and that she would give feedback to her niece. A day later I got a call from the tenant saying she wants to secure the place as soon as possible.  

She came to the apartment and we did the inspection and she signed for the keys. The following morning, I got an sms from her saying that she doesn’t like the place and she doesn’t feel safe, she demanded that I change the burglar door, which I then did. Soon after that, she sent another message that she had found another place and that she wanted her deposit back immediately. Please advise, how do I handle this situation? 

Cilna Steyn, Managing Director at Property Law firm SSLR, answers this week’s property question.

A:  This is, unfortunately, something we see quite often. Very often a tenant and landlord agree on the terms of an agreement and then one of the parties wants to get out of the agreement prior to commencement of the lease term, usually prior to or directly after taking occupation. The relevant question to answer is whether the agreement has been concluded or not, this will affect the remedies available to the parties.  

At this point, it is important to consider the moment of conclusion of a lease agreement. In terms of common law, a lease agreement will be concluded at the moment when the parties reach consensus, being a meeting of minds, as soon as the parties are both happy with the proposed termsLease agreements are a very simple concept of offer and acceptance. It is important to know that at this point in time it is not a requirement in law for lease agreements to be in writing. 

Promulgation of the Rental Housing Amendment Act will change this position, after enactment of this act lease agreements will have to be in writing, we do not have any indication at this point of when the promulgation date will be, but there is a six month window period to comply, so there is no reason for concern at this moment. 

It is also important to note that a lease agreement is always offered by the landlord to the tenantthe landlord offers the terms to the tenant and when the tenant accepts the proposed terms the contract is then concluded. This position can be postponed in terms of the lease agreement. What happens quite often in lease agreements is that the lease agreement specifically states when the lease agreement will be concluded, for example, the lease agreement might state that the agreement will only be concluded at the point of signature by the landlord. If this is the case, regardless of the common law position, the lease agreement will only be fully concluded at the point of signature by the last party. 

Further to your question, the relevant part of the Consumer Protection Act (CPA), being section 14 will have to be addressed. In a case where the CPA does apply, the tenant would be in a position to cancel the lease agreement by giving the landlord 20 business days notice of the intention to cancel the agreement. In this case it seems like there was a fixed term lease agreement and it appears as if the agreement was concluded between natural persons, this will then mean that section 14 of the CPA does apply.

With this in mind, immediate cancellation is not really an option for a tenant in this position. In a case where the CPA does apply, the landlord will only be entitled to claim reasonable cancellation penalties, however, in this particular situation the tenant did not cancel the agreement. The tenant’s actions amount to repudiation of the agreement, repudiation being a clear communication that the party will no longer be bound by the terms of the agreement.

With this in mind, my advice would be to accept the tenants repudiation by way of written notice and then further to claim damages because damages were suffered as the premises would most likely stand vacant for about two or three months, at the very least the deposit can be retained for the first months rental. The property has to be marketed immediately to mitigate damages, the tenant would definitely be liable for the damages suffered by the landlord up to the point of placing a new tenant.

My suggestion in matters like this would always be to negotiate first, tell the tenant what the position is and tell the tenant that she would be held liable for rental on the premises until a new tenant is found, this might encourage her to settle the matter. If, however, she is unwilling to come to an amicable solution, then the first step would be to withhold the deposit as you are entitled to appropriate the deposit to damages suffered. I would further recommend a claim for damages, in the form of court proceedings or even a claim at the Rental Housing Tribunal, as soon as the damages can be quantified, this will be as soon as another tenant has been placed.  

Source: SSLR Incorporated 

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