My tenants are moving out before the lease ends, what can I do?

Property Rentals

A rental income can be just the thing to supplement your income or create a semi-passive income for your future retirement. Having good tenants that follow the contract and look after your property is ideal and not impossible to find. What to do, however, if your tenants suddenly want to move out before the end of the lease period stipulated in the contract?


Why tenants would terminate the lease agreement prematurely…

There are as many reasons to terminate a lease agreement early as there are tenants renting property. Some reasons are justifiable, and some aren’t.


If a tenant got a new job in a different city, moving out is part and parcel of accepting the job. A relationship could have come to an end and the partner remaining in the property might not be able to pay the monthly rent. A pandemic might hit turning your tenant’s life and the world topsy-turvy and your tenant is forced to move due to a change in finances or to take care of family back home.


What does the contract say?

In South Africa, the Consumer Protection Act (CPA) allows a tenant to give 20 business days’ notice to exit a rental agreement. Once the tenant gives notice, the landlord has the right to charge a reasonable cancellation fee. The specifics of the lease agreement can also determine a lot of what happens when your tenant informs you that they want to move. If a cancellation clause is part of the agreement, then the cancellation fee should already be stipulated and agreed to. If there is no cancellation clause, the landlord stipulates the cancellation fee to be paid, and this is where things can get muddy because the question is, what is reasonable?


What is reasonable?

In a time where a lot of South Africans faced the reality of pay cuts or losing their jobs, this has become a very difficult question to answer. On the one hand, the tenant might not be able to afford the monthly rent, nor the cancellation fee set by a landlord. On the other hand, a landlord might be relying on the rental income and when a tenant gives notice, he/she is left with the uncertainty of having a potentially empty property to take care of. There are a lot of considerations that factor into deciding what to do.


If your tenant can’t afford the rent due to financial strain, do you give them a grace period where you either lower the rent or have them pay it back at a later date? If they are moving to take care of family, do you charge them a month’s rent and then start looking for a new tenant? If they are giving notice for something unreasonable, do you charge them three month’s rent?


So, what to do?

The CPA doesn’t detail what they consider to be reasonable. They do, however, detail some factors that need to be considered when determining the penalty:

  • What amount is still owing to the landlord on the date of cancellation?
  • What are the agreed lease terms?
  • What’s the length of notice given by the tenant?
  • What’s the general industry practice?
  • What’s the reasonable potential for the landlord, acting diligently, to find an alternative tenant during the notice period?


With these considerations in mind, the industry generally feels that a cancellation fee of two months’ rent with more than six months remaining on the agreement is fair. No two situations are the same, though. If there was no cancellation clause in place, it could be good practice for a landlord and tenant to agree to a penalty that will be beneficial and feasible for both parties before the tenant cancels.