Termination & Cancellation: Like apples and oranges.

The concepts of termination and cancellation of a lease agreement are very often used interchangeably by many landlords and tenants. Sound like the same thing, right? However, this is not the case, it is in fact, like apples and oranges.

Termination usually occurs by the effluxion of time. For example, if the lease agreement is signed for a period of 12 months, commencing on the 1st day of January and ending on the 31st day of December, the 31st day of December would be the termination date. The agreement will come to an end on this date, even if both parties performed all their duties in terms of the agreement. Termination is not a remedy, but a natural consequence of a lease agreement. This is, however not always the case. If the lease agreement is subject to the provisions of section 14 of The Consumer Protection Act, the tenant would have to receive notice of such impending termination no more than 80 and not less than 40 business days before such termination date. Should the landlord fail to give such notice, the lease agreement will not terminate on the 31st day of December and will continue on a month-to-month basis subject to the same terms as the initial lease agreement (assuming that no renewal or subsequent lease agreement has been entered into by the parties). Once a lease agreement no longer has a fixed term and is on a month-to-month basis, the lease agreement is no longer subject to section 14 of the CPA. Such an agreement can be terminated with one month’s written notice by either party, even if there is no breach committed by any of the parties.

Cancellation, on the other hand, is a remedy a party elects when the other is in breach of the terms of the agreement. This can, for instance, be non-payment of rent, noncompliance with conduct rules or any other breach of a term of the agreement. The aggrieved party would have to allow the other party time to remedy the breach and only if the party in breach fails to remedy the breach, in full, within the allowed time, may the aggrieved party cancel the agreement. In terms of section 14 of the CPA, cancellation of a lease agreement by the landlord during a fixed term lease, can only occur when the tenant is in breach of a material term of the lease agreement. The tenant must be afforded 20 business days in which to remedy such breach. Should section 14 not apply, the period allowed to remedy the breach before the agreement can be cancelled, will be determined by the initial lease agreement or whatever is considered “reasonable” in the circumstances.

Cancellation would leave the aggrieved party with a damages claim, since the agreement did not run its full term. Termination would not lead to any damages, since both parties agreed to the specific term at the start of the agreement and the agreement ran its full course.