# Regulatory Compliance Category > Consumer Protection Act Forum >  RENTAL PAID/ CANCELLATION OF A LEASE AGREEMENT

## Jddt

Hi All

I really need help/clarity on this following issue:

1) I rented a townhouse from an agent.
2) I then cancelled the lease in accordance with the CPA act by giving the relevant notice.
3) According to the CPA act - A reasonable penalty may be charged which I understand and you can no longer be held liable until the end of the lease period.
4) This penalty can only be calculated once a replacement tenant has been found.
5) A replacement tenant was found and this tenant paid all the deposits etc

Based on all this they have not returned my deposit - There was no damage to the property what so ever.

They are holding a months rental, damage deposit and services deposit.

They have stated that the damage deposit forms part of the penalty. The penalty charged is thus a months rental plus all the deposits I do not agree with this at all??? The agent is holding this money. I DONT SEE THIS A REASONABLE PENALTY IN TERMS OF THE CPA ACT.

Further to the above they want be pay a month's rental to the owner ? This cannot be right?

What is the purpose of the CPA act then as this is not reasonable at all.

Could someone please give me more clarity on this will greatly appreciate all the input.

Thanks

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## Roger15

According to my knowledge and personal opinion, the NCA does not apply to leases of immovable property. However when an estate agent or landlord engages with a credit bureau the estate agent or landlord will need to comply with the NCA, for example when: performing a credit check on a tenant (consent is required) , loading a default(blacklising) against the tenant (20 business days notice of intention to list is required)


Section 8 of Credit agreement I think

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## Dave A

> According to my knowledge and personal opinion, the NCA does not apply to leases of immovable property.


Did you perhaps intend *CPA*?

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## Jddt

According to the CPA, a lease agreement can be terminated by the tenant giving the relevant notice in this case 20 days which I did do.

My question is it basically legal what they have done as per above - I need more clarity on this issue please??

Thanks

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## Roger15

oops sorry

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## Dave A

Jddt - I'd ask for a detailed breakdown of the cancellation penalties raised. They might not be unreasonable as not all costs associated are incurred monthly.

For example - it's common practice for the agent to get a fee upon the signing of the lease. This is most often based on either the total value or the annual value of the lease and would need to be recovered in full despite the early termination.

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## Jddt

Hi Dave

I have done this and still waiting for the info.

What would you deem a reasonable penalty fee to be?

Can they hold back the damage deposit as well and the full months rental?

The CPA talks about a 10% - Would this be 10% of the annual value as described by you above?

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## Dave A

> oops sorry


In that case, check out the definition of "service" per the CPA - it seems to include rental of fixed property.

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## Dave A

> The CPA talks about a 10% - Would this be 10% of the annual value as described by you above?


I'm not too sure where you get the 10% figure from.

Regulation 5.2 has this to say:

2) For purposes of section 14(3), a reasonable credit or charge as contemplated in section 14(4)(c) may not exceed a reasonable amount, taking into account-

a) the amount which the consumer is still liable for to the supplier up to the date of cancellation;

b) the value of the transaction up to cancellation;

c) the value of the goods which will remain in the possession of the consumer after cancellation;

d) the value of the goods that are returned to the supplier;

e) the duration of the consumer agreement as initially agreed;

f) losses suffered or benefits accrued by consumer as a result of the consumer entering into the consumer agreement;

g) the nature of the goods or services that were reserved or booked;

h) the length of notice of cancellation provided by the consumer;

i) the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation; and

j) the general practice of the relevant industry.

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## Jddt

Hi Dave

This seems to be a stupid answer here from you - This relates to the sale of goods not rental income.

Not so clever after all.

Thanks

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## Dave A

Not enough coffee yet this morning?




> This relates to the sale of goods not rental income.


S 14 relates to the expiry and renewal of fixed-term agreements. It's also the section you have relied on in claiming your consumer's right to provide 20 business days notice of early termination.

Regulation 5.2.c & 5.2.d probably may not apply in your situation as it is clearly limited to goods, but the balance certainly does apply to goods *and* services.

I still can't find any reference in the CPA to the 10% figure you referred to earlier. Perhaps when you have a spare moment you could be so kind as to steer me in the right direction.

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## Basment Dweller

I'm not sure what the CPA states but when you sign a lease with a landlord you enter a written contract that binds you to a certain term, cancelling the lease comes with penalties, so what does the lease say?

The landlord probably incurred an agent commission cost and advertising cost to replace you with a new tenant.

The lease agreements I have with my tenants state a 'reasonable penalty fee no more than 2 months rental', so if I incur agent/advertising fees then I'm deducting that from the deposit. Agents commission is normally one months rental so a months rental deduction is a fair penalty when canceling a lease agreement.

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## Houses4Rent

First question is does the CPA apply and in most cases it does.  If it does you have 20 business days notice which you used and the other side can claim damages if there are any.

Secondly was there a vacancy between your last day of lease and the new tenant moving in? If not no rental loss incurred and can be claimed as damages. Most often it actually enables the agent/owner to raise the rent earlier than anticipated (subject to demand/supply situation)

Thirdly legislation does not specify anywhere what "reasonable" means, but as far as I know damages must be true costs substantiated by invoices.

Who found the new tenant, you or the agent?

What did your breakdown of deposit say then?

If you disagree and the agency does not meet your expectation go to the rental tribunal for free advise.

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