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Double-edged Consumer Protection |
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by Amien Hoosain
Some lawyers argue that the Consumer Protection Act cannot apply to lease agreements, as that would be absurd. Well, it is certainly true that applying the Act to leases is absurd, but the intention of the legislature is clear from the language of the Act: it applies to leases.
For example, the Act stipulates that a consumer (read tenant) may cancel a fixed term consumer agreement (read lease) at any time on 20 business days’ notice to the supplier (read landlord), subject to a “reasonable” cancellation penalty. Furthermore, a fixed term consumer agreement may not exceed the prescribed maximum period of 24 months.
In many large rental operations, such as shopping centres or business parks, the landlord’s primary focus is on an assured income stream. This is partly achieved by fixed term leases, usually for more than 24 months.
In both respects – limiting the lease period and letting the tenant cancel the lease at will – the Act makes inroads on the certainty the landlord seeks.
Landlords will no doubt look at mitigating the potential losses. An option that springs to mind is to avoid lease agreements with tenants who qualify as consumers. Another is to substantially – some might say “massively” -- increase deposits.
These measures spell bad news for the small to medium enterprises that government is in all other respects trying to encourage. While much of the effect of the Act is yet to be felt, it might just achieve the direct opposite of what the legislature wanted.
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