SUBMISSION ON RENTAL HOUSING
AMENDMENT BILL [B30-2007]
1. Background
Although
Rental Housing Amendment Bill seeks amongst other issues, to amend the Rental
Housing Act of 1999, so as to substitute, to make further provision for rulings
by Rental Housing Tribunal; to expand the provision pertaining to leases. It
must also provide for consequential amendments pertaining to intervention in
rental property business and provide for amendments to provisions to refine the
process to seek Alternative Dispute Resolution and related matters, so as to
insert a section relating to regulations of rental property business; to
re-enact certain provisions and to provide for matters connected therewith.
It is
common knowledge that
So far,
there is lack of dispute resolution mechanism being expressly provided in the
legislation to give these operators an unfair advantage to do as they wish
without being accountable or regulated by any body. Certainly, there is need
for legislation to regulate rental property business operators or amend the
Rental Housing Act of 1999.
Tragically,
most South Africans have fallen prey of self-storage rental property business
operators because they trade recklessly, without any regard for the interests
of their customers or tenants. Such self-storage rental property businesses
operate on shaky legal framework, which allow unscrupulous operators to take
advantage of an obvious loophole. The perpetrators usually get away and victims
lose their hard-earned possessions, often left destitute without any recourse. This
is deeply disturbing that the South African public are exploited as a result of
loopholes in a legislation and lack of regulatory framework to protect them
against unfair practices and bullying tactics of rental property business
operators.
2. Loopholes
affecting tenants negatively
While
self-storage rental property business remains unregulated, operators tend to
recover arrear rental by repossessing tenant’s personal goods without a court
order. Furthermore, they conduct a lien sale or auction without a court order -
a practice which is wrong and illegal or flagrantly abusive, thus directly or
indirectly purporting to waive or deprive the tenant’s right to be informed, to
be heard or/and redress as customers.
Under
these circumstances, self-storage rental property business operators use
pressure, unfair tactics or any other similar conduct by virtue of power or
legal advantage they assume to hold, in connection with any demand for rent or
penalties; or the recovery of arrear rental from a client.
These
operators take advantage of the fact that a potential customer was
substantially unable to protect his or her own interests because of inability
to understand the language of an agreement, or any other similar factor.
Ideally, every customer has a right to assume, and it is an implied provision
of every agreement. The rental agreements of most self-storage rental property
business operators do not even warn tenants that personal goods stored in the
unit will be subject to a willy-nilly lien sale or auction if rent or penalties
becomes delinquent, including language expressly “requesting” tenants to
furnish an alternative contact.
Delinquency
notices are not sent to tenants in writing to provide reason for the rent being
in arrears, including finding any other way to settle, even for less than a
full amount. These operators refuse to find any other way to settle except to
recover arrear rental by seizure of tenant’s personal goods without a court
order, the conduct which is illegal and unacceptable, to put it mildly.
By common
law, it is only the sheriff of the court who can seize the tenant’s goods to
guard against self-dealing or collision tactics aimed at withholding the
tenant’s possessions in bad faith to benefit operators or friends. It is the duty
of the Sheriff to take stock of the commercial value of the goods attached and
sell them to repay the operator the money that is owing without any prejudice
to any party.
The
reason operators do not follow this simplest form of civil procedure is that
they treat tenant’s stored goods as bags of garbage without any real value and
have no regard of property rights or personal rights and the law. Generally, a
sale or auctioning of goods is required to be commercially reasonable in order
for the service provider to equitably compensate the consumer for losses or
expenses in the event the execution is found to be defective or illegal. Many
operators do not understand just what the word ‘commercially reasonable’ means,
and they conduct their lien sales and/or auction in an improper way or sell
tenant’s goods in an unreasonable manner.
In other
words, most operators conduct lien sales or auctioning of tenant’s possessions
without assessing the goods’ commercial value. In some cases, such execution is
a big waste of time and money because selling goods in a commercially
reasonable way is a lot of effort that involves expense and risk. At times, it
is best to resolve the dispute in whatever means possible rather than acting
prematurely and recklessly to risk being subjected to unnecessary settlements
or protracted legal battles to pay all claims equal to the replacement value of
the goods in question.
In
general, settlement amount is always at the cost of the tenant as it does not
fully replace the actual value of the goods lost.
This is a
good glimpse of loopholes:
i).
Operators never follow the prescribed civil procedures in terms of requesting
the court to issue an order to attach the tenant’s possessions. Yet this
procedure creates uniformity and certainty in terms of redress and settlements.
ii). They
fail to conduct the fair market value of the goods before the resale price of
the goods or auctioning of tenant’s possessions to reach the appropriate market
value.
iii).
They fail to use of genuine, reasonable efforts to conduct the nature and
amount of advertising to get buyers to a sale. This is to ensure that the
secured party’s efforts are reasonably calculated to reach a reasonable number
of bidders or potential purchasers in the appropriate market.
iv). The
method used to solicit bidders or potential purchasers remain ambiguous with
regard to the number of potential buyers contacted prior to the sale and the
nature of the sale (Was it public or private? Were the services performed by an
experienced, professional auctioneer? Was it conducted in a reasonable manner
under normal business conditions using standard business practices?)
v). Some
operators do not advertise in a paper of general circulation or less-expensive
and less-circulated newspapers, relating to whether the sale is public or
private. As result, it renders the sale unreasonable-and improper sale.
Using an
auctioneer is not necessary proof enough that an operator conducted a
reasonable sale, but it is a factor of collusion or self-dealing that comes
into play. This usually involves a certain person winning because the operator
or official helps that bidder understand the value of a unit’s contents. If a
unit contains valuable items that have not been disclosed in the inventory or
cannot be seen from the outside, this constitutes an improper sale.
3. Alternative dispute resolution
Though it
is clear that the Rental Housing Tribunal has exclusive jurisdiction to hear
cases relating to residential accommodation disputes. This legislation must be
revised to close the obvious loopholes and clamp down on unscrupulous
self-storage rental property business operators who trade recklessly to
unreasonably prejudice rights or interests of tenants (consumers). Revision
will create uniformity and certainty and also help to prevent double jeopardy
in dealing with tenant/rental property business dispute issues.
Perhaps,
the current legislation must be replaced with Rental Property and Housing Bill to
make it clear that it regulates rental property and residential accommodation
concurrently in jurisdiction. We certainly hear reports of operators or
managers taking more “formal” inventories or rummaging through units to know
whether it’s worthwhile for the owner or a friend to bid. Such failure to
disclose information in the inventory or advertisement for the unit, constitutes
an improper sale because is not dealing with equal and fair information.
The case
in point, M Phaahla V Rent-A-Store in which a complaint of unfair business
practice and investigation into unregulated business activities of Rent-A-Store
(PTY) LTD of Registration Number 1996/01135/07 of corner Johnnic Boulevard
& K101 Road, Midrand; was lodged with the Department of Trade &
Industry, Consumer & Corporate Regulation Division - Office of the Consumer
Protection.
Recitals
A. On 10
July 2006, the complainant sent a letter of complaint against the Respondent
{Rent-A-Store (PTY) LTD} to the Department of Trade & Industry, Consumer
& Corporate Regulation Division - Consumer Investigations Directorate. In
this case, Ms Monique Toich of Rent-A-Store, unlawfully gained entry into the
complaint’s storage unit without consent and/or seized a variety of household
accessories, collected items and coins, set of keys, curtains, bedding,
suitcase with variety of valuable documents such bank and retail account
contracts, cellphone, clothes, personal and family photos, birth, baptismal and
church confirmation and matriculation certificates and other items of
sentimental value purporting to auction them off to cover arrear rental without
a court order.
Despite
all of this, the extensive seizure or confiscation conducted by Ms Monique
Toich and/or Rent-A-Store took place and statutory documents which should not
have been seized were taken, and left the complainant prejudiced both
materially and otherwise and left destitute as some of his personal belongings
and other items of sentimental value are missing and/or stolen, also were never
disclosed in the auction inventory and/or received by North Gate Auctioneers
from the date of the break-in into the storage unit. The fact that these
documents are still missing and/or in their possessions the breaching of
privacy continues.
B. On or
about February 2007, the Directorate liaised with the Respondent to listen to its
side of the story.
C. On 18
April 2007, the Respondent’s lawyer (Almie Fourie of VAN WIJK ATTORNEYS)
liaised with the complainant on this matter however the complainant presented
an argument that her client’s action was sloppy, flawed and unconstitutional.
Also that it is a trite principle of law that when parties differ and cannot
arrive at a solution, one party cannot take the law into his/her hands. The
parties must make use of the prescribed civil procedure in order to solve their
dispute. The Respondent’s lawyers admitted that its client’s actions were
fundamentally flawed, defective and manifestly unjust, as such made a verbal
proposal to enter into a Settlement Agreement with the complainant to extricate
the Respondent from pending investigation of the dti and/or in order to provide
for certain payments in full settlement and discharge of all claims which are
the subject of the dispute.
D. The
complainant demanded a payment of the amount of R25 000 (twenty five thousand
rands) in full settlement of loss, expenses and compensation to damages,
including missing and/or stolen possessions which were not disclosed in the
auction inventory.
E. The Respondent’s
attorneys of record proposed a settlement offer for the sake of settlement and
"without admission of liability", that the matter be settled on the
basis that Rent-A-Store pays an amount of R12500.00 to the complainant within
48 hours of acceptance of the offer.
F. The
complainant rejected the offer on the following reasons:
1. The
amount is not even equivalent to the value of his goods auctioned, excluding
those missing and/or stolen as not disclosed in the inventory or recorded in the
inventory received from the auctioneers.
2. That
it does not fairly and equitably compensate his losses or expenses of the goods
which Rent-A-Store cannot return.
3. Had no
reasons to accept such an offer or have faith in its efficacy as it prejudices the
complainant materially and unreasonably.
Under the
circumstances, the complainant sought legal advice in the matter and instructed
his attorneys to take over the case and institute all action proceedings which
may be necessary to seek relief at the court of law and sue for damages include
damages for pain and suffering in addition to legal fees.
It is
common cause that the Office of the Consumer Protection will still launch
investigation into unfair business practices in general, which are likely to
have the effect of harming the relations between businesses and consumers,
unreasonably prejudicing any consumer, deceiving any consumer or unfairly
affecting any consumer. If, at the end of a formal investigation, the Office of
the Consumer Protection finds that the conduct or activity in question
constitutes an unfair practice, it will recommend to the Consumer Affairs
Committee that the practice be prohibited by way of a Ministerial order
published in the Government Gazette.
Notwithstanding
that the main aim of the complaint was for the Consumer Affairs Committee to
impose sanctions against the Respondent to correct the relevant prohibited
conduct, if situation warrants, review its property rental agreements to alter
any practice, form or document in order to cease any practice which may result
in a repetition of its conduct or even to advise the minister of trade and
industry to have the activities of the Respondent declared unlawful in the
government gazette.
It goes
without emphasis that South Africa cannot allow a situation where people's
rights are violated in such a prejudicial way to the extent that tenant’s
belongings, including statutory documents such as birth certificate, baptismal
and confirmation certificates, would be seized without a court order despite
available possible avenues to recover arrear rental.
Whatever
the case, there is a reasonable cause for the Joint Sitting of the National
Assembly and National Council of Provinces to develop a legal framework which
regulates the rental property business in South Africa in order to protect the
public from unfair business practices that seek to violate consumer rights, and
just business practices.
4.
Conclusion
As
indicated that the Rental Housing Tribunal is established under the Rental
Housing Act of 1999 which deals only with disputes between landlords and
tenants in respect of a dwelling for housing purposes. As a result, most
unscrupulous self-storage rental property business operators exploit this
loophole to commit unfair practices and cause an unreasonable prejudice to the
rights or interests of the consumers (tenants). The lack of alternative dispute
resolution process being expressly provided in the legislation will continue to
serve an impediment to the rights or interests of the tenants, thus allowing
operators to get off scot-free without any admonition by regulation or
legislation.
It is for
this reason that legislation will serve as deterrence for most unscrupulous
rental property business operators who trade recklessly, without any regard for
the rights and interests of tenants (consumers). From the case above, one can
only point to a deep-seated dishonesty and a culture of victimization on the
part of what can be referred to as unfair business practices.
Prepared
by
Morgan Phaahla
01 September 2007