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 South Africa needs a legislation to regulate self-storage rental property business to protect consumers (tenants) from unfair business practices. It is common cause that the Rental Housing Act of 1999, has obvious loopholes on thorough analysis of its jurisdiction and limitations and/or consequence thereof. It is only fair to say that the Housing Rental Tribunal do not hear cases of unfair practices relating to unreasonable prejudices of rights or interests of clients being perpetrated by self-storage rental property business operators. As a result, all of this leads to a situation where these self-regulated operators being law unto themselves, with no regard for fair, just and accountable business practices as required by relevant statutes.

 

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 tenantís 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 tenantís 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 ďrequestingĒ 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 tenantís 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 tenantís goods to guard against self-dealing or collision tactics aimed at withholding the tenantís 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 tenantís 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 Ďcommercially reasonableí means, and they conduct their lien sales and/or auction in an improper way or sell tenantís goods in an unreasonable manner.

 

In other words, most operators conduct lien sales or auctioning of tenantís possessions without assessing the goodsí 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 tenantís 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 tenantís 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 partyís 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 unitís 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 ďformalĒ inventories or rummaging through units to know whether itís 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 complaintís 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 Respondentís lawyer (Almie Fourie of VAN WIJK ATTORNEYS) liaised with the complainant on this matter however the complainant presented an argument that her clientís 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 Respondentís lawyers admitted that its clientís 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 Respondentís 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 tenantís 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