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Fixed term

14 April 2011

The fixed term consumer agreement - not so fixed thankfully
The Final regulations to the Consumer Protection Act ("the Act") arrived a few hours after the Act itself and with its belated gazetting finally brought the entire Act into full force and effect.

Section 5 of the Final regulations, read with Section 14 of the Act, most importantly, has added the much needed proviso that the previously suggested fixed period of 24 months for any consumer agreement is no longer cast in stone.

The section now provides for an extension beyond such period if a tenant agrees thereto and the landlord is able to show an obvious financial benefit to the tenant

This addition to the Final regulations, for the first time, gives hope to those Commercial and Industrial landlords, whose tenants are natural persons, (as opposed to tenants who are commercial entities and who have no protection in terms of section 14 of the Act) as now they are able to raise legitimate financial benefits to the tenant to potentially secure a longer lease. This includes inter alia the fact that with a lease longer than 24 months, a commercial tenant can build up trends, add value to a business, afford unto themselves security of tenure and accordingly, and in turn, provide the landlord with the necessary protection, to some degree, of having a decent lease period to use as collateral security for whatever purpose they need.

The need however for the landlord will be to ensure that a reasonable penalty be agreed upon, to accommodate any breach, especially that of a tenant who has been provided with an installation allowance pursuant to an agreed longer lease.

Marlon Shevelew

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