What happens if a tenant wants to cancel a lease early?

There are plenty of reasons a tenant may want to end a lease early, from a new job in a new area to affordability issues etc. What every consumer needs to double check before signing a lease agreement, is that their lease makes provision for an early cancellation as per the Consumer Protection Act (CPA).

READ: What happens when you wish to cancel a lease agreement before occupation?

"This act is intended to protect the rights of both landlords and tenants," says Jacqui Savage, National Rentals Manager for the Rawson Property Group. "In the case of early lease termination that means protecting tenants' rights to end a lease agreement that no longer serves them, while also protecting landlords' rights to maintain a secure and stable investment." Exactly how this is accomplished remains a common source of confusion, however. These are the most frequent early cancellation questions that Savage receives from both landlords and tenants.

When can a tenant cancel a lease?

"Tenants are legally permitted to cancel their lease at any point, with 20 business days' written notice" says Savage. "They may, however, have to pay a reasonable cancellation penalty for the privilege. The details of this penalty must be included in writing in the lease agreement and agreed to by all parties at the onset of the Lease Agreement."

What is a "reasonable cancellation penalty"?

"The CPA is very clear that the early cancellation penalty may not be so high that it discourages tenants from enacting their right to cancel the lease agreement and it is therefore very important for tenants to read and understand their early cancellation penalty before signing a lease agreement". While regulations don't specify exactly what is considered "reasonable", Savage says various factors need to be looked at to determine what will be a reasonable penalty, which could be determined by the remaining duration of the lease agreement, and also would it be easy to find a replacement tenant?

When does the early cancellation penalty not apply?

"Early cancellation penalties only come into effect once a tenant has vacated the premises and there is no longer rental income," says Savage. "If a new tenant is placed immediately, and a new lease agreement signed for the same period or longer, there would be no financial loss due to vacancy, so that part of the cancellation penalty would fall away. "The departing tenant may still be held liable for advertising costs or placement fees incurred in the process of finding the new tenant.

READ: In the event that a tenant ends the lease early in writing, is he or she still liable for rent?

The importance of having a decent lease agreement

Abrahams & Gross's Litigation and Dispute Resolution attorney, Henno Bothma, as a landlord, renting out your property can be an excellent source of income, but it also comes with a degree of risk. To mitigate this risk, it is crucial to have a proper lease agreement in place to protect yourself and your property.

What is a lease agreement? 

A lease agreement is a legally binding contract between a landlord and a tenant that outlines the terms and conditions of the rental arrangement. A well-drafted lease agreement should cover all aspects of the tenancy, including rent, security deposit, maintenance responsibilities, and tenant obligations. It should also provide a framework for resolving disputes and terminating the tenancy.

Why does a landlord need a watertight lease agreement?

Having a proper lease agreement is essential for landlords for several reasons. Firstly, it helps to establish a clear understanding between the landlord and the tenant about their respective rights and obligations. This can help to prevent misunderstandings or disputes that may arise during the tenancy.

Secondly, a lease agreement can protect the landlord's property by setting out guidelines for maintenance and repairs. This can help to ensure that the property is maintained in good condition and that any damages caused by the tenant are addressed promptly.

Thirdly, a lease agreement can provide a framework for resolving disputes that may arise during the tenancy. This can help to minimise the risk of costly and time-consuming legal proceedings.

Fourthly, a lease agreement can help to protect the landlord's financial interests by specifying the terms of rent payments, late fees, and security deposits. This can help to ensure that the landlord receives the rent on time and is adequately compensated for any damages or unpaid rent.

A sound lease agreement is essential

In summary, a well-drafted lease agreement is essential for landlords to protect themselves and their property. It provides a clear understanding of the terms and conditions of the arrangement, establishes guidelines for maintenance and repairs, provides a framework for resolving disputes, and protects the landlord's financial interests.

Speak to a legal expert 

As a landlord, it is important to seek the advice of a legal professional to ensure that your lease agreement complies with all relevant laws and regulations, and is tailored to your specific circumstances.

READ: I signed a lease agreement, it's been 3 days, and the landlord has not yet signed, may I cancel?

* Disclaimer: The articles on these web pages are provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as legal advice. Always consult a suitably qualified attorney on any specific legal problem or matter.