The National Credit Act, 2005 (“National Credit Act“) has widely been criticized as being one of the most confusing pieces of legislation in our law. In fact, in Absa Technology Finance Solutions (Pty) Ltd v Michael’s Bid A House CC and Another 2013 (3) SA 426 (SCA), in referring to the decision made by the court of first instance, Lewis JA stated “the [H]igh [C]ourt … held that the particular lease was not a lease. This may sound like a fragment of Alice in Wonderland. If that is so, it is because the [National Credit] Act itself could have been written by Lewis Carroll, so peculiar are some of its provisions“. So what is it about the way the National Credit Act deals with leases that is so peculiar?
What is a lease?
Most would agree that a lease can accurately be described as an agreement in terms of which one person (the lessor) gives another person (the lessee) temporary possession of property in exchange for the payment of rent. The word “temporary” assumes that the property must be returned by the lessee to the lessor at the end of the agreement.
The National Credit Act’s definition of a lease
The National Credit Act also defines a lease as an agreement in terms of which “temporary possession” of movable property is given to a lessee. However, the definition then goes on to specify that at the end of the agreement, ownership of the property in question passes to the lessee (rather than requiring possession to be returned by the lessee to the lessor).
This definition is clearly problematic. Not only does it run counter to the essential elements of a lease, but the reference to “temporary possession”, followed by the requirement for ownership of the property to pass to the lessee at the end of the lease, is illogical.
While the National Credit Act is commendable in its aim to protect consumers by promoting fair and responsible lending practices, it can be an intimidating piece of legislation, rife with obscurity. If you are in the business of leasing moveable property, be sure to investigate whether the National Credit Act applies to you.
https://www.brevitylaw.co.za/wp-content/uploads/2021/02/confused-man.png634900Office Adminhttps://www.brevitylaw.co.za/wp-content/uploads/2017/08/brevity-logo-1-300x138.pngOffice Admin2021-02-11 07:48:582021-02-11 07:49:53WHAT DOES THE NCA SAY ABOUT LEASING MOVABLES?
Cnr Dock & Portswood Roads
T | +27 21 422 0102 E | email@example.com
Privacy & Cookies Policy
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.