Picture this: you’re the founder of a flourishing startup, and you’ve signed a 24-month lease for a traditional office space.
One year later, you’re wishing you hadn’t.
Maybe you want to relocate your business, maybe the space no longer suits your needs, or maybe you’ve come across a more cost-effective option. Either way, you’re desperate to get out of your lease early.
Luckily, terminating a commercial lease in South Africa is not a breach of contract, no matter what your landlord says. As long as you have a valid reason for wanting to get out early, cancelling a lease without negatively impacting either party is entirely possible.
What the Consumer Protection Act (CPA) says about terminating a lease early
In terms of the CPA, tenants have the right to cancel a lease prematurely. Different rules apply depending on whether the lease has been signed by an individual (“natural person”), or in the name of a company (“juristic person”).
If you’ve signed the lease as an individual
It’s entirely within your right to end a lease early with zero breach of contract. You can legally cancel the lease agreement in a written notice submitted to the landlord at least 20 business days before you plan to leave.
Bear in mind that the landlord you’ve leased space from is entitled to impose a “reasonable cancellation penalty”. This isn’t to penalise the tenant, but rather so that the landlord can recover any losses that may have been incurred by an early cancellation.
Penalty for early cancellation
Landlords may be friendly, but they won’t let you off so easily without getting something back. The cancellation penalty can include the following.
- costs of advertising to find a new tenant
- credit checks for a prospective new tenant
- any rent lost by the landlord when the property stands vacant between tenants
Remember: the landlord is only entitled to recover costs that have actually been incurred and can be proved.
A maximum period no matter what
Another important thing to be aware of is that, according to section 14(2) of the CPA, a fixed-term agreement may not exceed a maximum period of 24 months. So, even if you’ve signed a lease for longer, it’s effectively only valid for two years.
If you’ve signed the lease as a company
If you sign a commercial lease as a company, an early cancellation depends solely on the content of your contract. That’s why it’s of the utmost important to read and understand the fine print of any rental agreement.
Get the clause in
Ideally, your contract should include an early termination clause to guide you. If, however, there’s no clause that specifies early termination conditions (which is very often the case), you won’t have an automatic right to cancel your lease before its expiration.
You may then be required to negotiate with your landlord – not an ideal situation, since your landlord can simply say “no”.
Don’t get stuck
A good way to avoid this scenario is to prevent it in the first place. Before you sign your lease, agree with your landlord and get in writing what will happen in the event of an early cancellation.
There’s an even better option for entrepreneurs who are clever not to fall into that trap.
Clever entrepreneur’s alternative
The Workspace is the perfect alternative to a traditional office space. You won’t get locked into a lengthy lease.
At The Workspace, we offer affordable, fully serviced offices and coworking, and all our clients have access to meeting rooms, boardrooms and a range of business services. For more information or to book a tour of one of our branches, call us on 0861 250 259 or contact us online.