FROM THE LEGAL DESK | Is a fixed term lease always subject to the consumer protection act?

On 27 October 2025, in the matter of Els v Venter and Another, the Supreme Court of Appeal put the cat amongst the pigeons. Properly! 

The central issue in this appeal was when a residential lease agreement, concluded between two parties, constitutes an agreement for consideration "in the ordinary course of business", as contemplated in the Consumer Protection Act 68 of 2008 (the Act). 

In order to appreciate this importance and relevance of this article please take the time to read it. Most of it is a verbatim extract from the judgment.

The landlords decided to let out the property, shortly before they emigrated to Australia, as they were not sure about whether they would settle there, and decided to retain ownership in case they returned. On 1 December 2020 they concluded a lease agreement with the tenant, for three years, ending on 31 December 2023 (the first lease). The tenant complied fully with his obligations under the first lease. In February 2023 the tenant asked the landlord to extend the first lease. At that point, the landlords had decided that they were going to settle in Australia and would sell the property. They informed the tenant accordingly and told him that any further lease would be subject to a notice period of three-months for termination by the landlord. Upon expiry of that period, the tenant would have to vacate the property. They did not want a lease to stand in the way of its sale. The tenant agreed to this. On 4 August 2023 the parties entered into a new written lease agreement for a further period of three years, which commenced on 1 January 2024 and which would have terminated on 31 December 2026 (the second lease). Clause 29.2 of the second lease provided: 'The Landlord shall be entitled to terminate this agreement on 3 (three) months' written notice to the Tenant before termination date.'  Following the conclusion of the second lease, the property was marketed. It was sold on 19 December 2023. In terms of the deed of sale, the purchasers were granted vacant possession of the property on 1 April 2024.

On 21 December 2023, and in terms of clause 29.2 of the second lease, the landlords served a notice of termination on the tenant (the termination notice). In terms of that notice, the tenant was required to vacate the property by 31 March 2024. The tenant responded to the termination notice on the same day i.e. 21 December 2023. He conceded that the landlords were entitled to issue the termination notice, but referred to the principle 'huur gaat voor koop' which, he said, meant that the second lease was transferred to the new owner, who knew of its existence. The landlords denied this (correctly so, because all that huur gaat voor koop means, is that if a property is transferred, whilst a lease is in place, the lease must be adhered to, but in this instance, it was to be cancelled, prior to transfer. As such it would not apply.) The landlord replied that the tenant should negotiate with the new owners, who were going to occupy the property by 1 April 2024.

There was no further communication between the parties until the landlords received a letter from the tenant's attorneys on 28 January 2024. In this letter it was contended that the second lease fell within the ambit of s 14 of the Act; that it could only be terminated on the ground of a material breach by the appellant; that its termination was unlawful and invalid; and that the tenant would hold the landlords to the terms of the second lease.

After multiple failed attempts to resolve the dispute, the landlords filed an urgent application in the High Court. They sought a declaration that the second lease was valid; that the Act did not apply; that the termination notice had properly been given; and that the tenant should vacate the property by 1 April 2024. 

Before the High Court, the tenant stated that he understood that the sale of the property would be subject to the second lease. Further, he contended that the lease constitutes a fixed-term agreement concluded in the ordinary course of business, as contemplated in the Act; and that it could not be terminated in circumstances where he had not materially breached its terms. The High Court granted the relief sought by the landlords. It made an order
that the termination notice was valid; that the tenant and those holding title under him, should vacate the property by 31 March 2024.

This was then taken on appeal to the Supreme Court of Appeal. The SCA then looked at the Consumer Protection Act. S 5(1) of the Act states, inter alia that the Act applies to every transaction unless it is exempted by subsection (2), (3) and (4). Section 1 defines a 'transaction', in respect of a person acting in the ordinary course of business, as an agreement between or among that person and one or more other persons for the supply or potential supply of any goods or services in exchange for consideration, the performance by, or at the direction of, that person of any services for or at the direction of a consumer for consideration. The Act then defines 'service' as including but not limited to the provision of access to or use of any premises or other property in terms of a rental.' The Act defines 'rental' as an agreement for consideration in the ordinary course of business in terms of which temporary possession of any premises or other property is delivered, at the direction of, or to the consumer, or the right to use any premises or other property is granted, at the direction of, or to the consumer, but does not include a lease within the meaning of the National Credit Act.

The term 'ordinary course of business' is not defined in the Act. However, it defines 'business' as the continual marketing of any goods or services; and 'market', when used as a verb, as meaning to promote or supply any goods or services.  The Act states that a 'supplier' means a person who markets any goods or services; and that '"supply", when used as a verb, in relation to goods, includes sell, rent, exchange and hire in the ordinary course of business for consideration; or in relation to services, means to sell the services, or to perform or cause them to be performed or provided, or to grant access to any premises, event, activity or facility in the ordinary course of business for consideration.

The Act then defines 'consumer', inter alia, and in respect of any particular goods or services, as a person to whom those particular goods or services are marketed in the ordinary course of the supplier's business.

Section 14(2)(b)(ii) of the Act, on which the tenant relied, provides that if a consumer agreement is for a fixed term, despite any provision of the consumer agreement to the contrary, the supplier may cancel the agreement 20 business days after giving written notice to the consumer of a material failure by the consumer to comply with the agreement, unless the consumer has rectified the failure within that time. In other word you must first give 20 business days' notice.

A 'consumer agreement' is defined in the Act as an agreement between a supplier and a consumer other than a franchise agreement.

QUESTION that the court therefore had to answer, was this: Is the lease one in the ordinary course of business?

On its plain wording, the Act requires that the letting of premises must fall within the 'ordinary course of business' of the lessor, and the lessee must be a 'consumer', i.e. a person to whom services are marketed in the ordinary course of the supplier's business. In other words, the lessor firstly, must be in the business of letting or hiring premises. In turn, 'service' includes, but is not limited to access to or use of any premises or other property in terms of a rental.

Secondly, the rental or lease agreement must therefore fall within the lessor's 'ordinary course of business' and having consulted a dictionary this means as part of the normal routine in managing a trade or business. 'Ordinary' means as a matter of regular practice. Whether a lease is within the lessor's ordinary course of business is an objective test that requires an examination of the relevant transaction in its factual setting. This depends on what business is conducted by the supplier in question and how it is carried on. The issue is not whether the transaction is ordinary, but whether it is carried out in the ordinary course of the supplier's business.

Applied to the present case: The landlords were found not to be in the business of letting property for consideration. They were not engaged in any trade, or business. This was a once off lease where the tenant was given a lease whilst the landlords decided whether to settle in Australia permanently. As such the tenant was also not a consumer as is defined and neither were the landlord's suppliers, as defined. And as such, the lease was found not to fall within the ambit of the CPA. And this meant that the tenant was not entitled to rely on any protection afforded by the CPA.

What does this mean for you as a rental agency?

This judgment is of significant value to landlords. It means that landlords who are not in the business of renting out their properties, should NOT include any reference to the CPA in the lease! If a lease is not subject to the CPA, then the common law will apply when it comes to breach. Then the parties may agree that if the tenant fails to pay timeously, the landlord may give 7 days' notice - or even 3 days, or the agreement might even allow the landlord the right to terminate the lease, summarily! The common law allows for far greater flexibility than the CPA, which is of great benefit to landlords. 

As for pending leases, one will have to study the clauses carefully to see whether and to what degree a landlord must put a tenant to terms before being allowed to cancel the lease, despite this ruling. 

In closing then, landlords who do not lease out property in the ordinary course of business should welcome this judgment.

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