Early Cancellation of a Residential Lease: Landlord vs Tenant

Early Cancellation of a Residential Lease: Landlord vs Tenant

By Cilna Steyn, Managing Director of SBL Incorporated

Early cancellation of a residential lease is often misunderstood, particularly because the rights of a tenant and landlord are not the same.

When the tenant wants to cancel

Where section 14 of the Consumer Protection Act (“CPA”) applies, a tenant may cancel a fixed-term lease by giving 20 business days’ notice.

The tenant remains liable for amounts owing up to the date of cancellation, and the landlord may charge a reasonable cancellation penalty.

This does not, however, mean that the landlord can automatically claim all the rental that would have been payable for the rest of the lease.

What about the landlord?

A landlord can, of course, cancel a lease following a material breach, subject to the applicable legal requirements.

But this is not the only circumstance in which a landlord may have the right to bring a lease to an end.

Section 4(5)(c) of the Rental Housing Act (“RHA”) specifically recognises a landlord’s right to terminate a lease on grounds that:

• are specified in the lease; and
• do not constitute an unfair practice.

This is important because the landlord’s right to end a lease is therefore not necessarily limited to a breach by the tenant.

The terminology used in a lease is not decisive on its own. A clause referring to “cancellation” must still be read in its proper context, having regard to the right it creates, why it may be exercised and its intended effect.

Why the lease matters

The lease should clearly provide for the circumstances in which either party may bring it to an end.

For landlords in particular, a contractual right contemplated in section 4(5)(c) of the RHA should be properly recorded in the lease. Without it, the landlord cannot simply rely on the Act as a general right to terminate whenever they choose.

And even where a lease has been lawfully terminated, that does not entitle a landlord to simply remove a tenant who remains in occupation. The proper eviction process must still be followed.

The important distinction is therefore not simply who uses the word “cancellation” or “termination”. It is who is ending the lease, why they are doing so, what the lease provides, and which legal right is being exercised.