How to deal with penalty fees for late rental payments

How to deal with penalty fees for late rental payments

Private Property South Africa
Sarah-Jane Meyer

Many people in South Africa are under financial pressure as a result of the Covid-19 pandemic, as well as constantly increasing living expenses. Thousands of people have lost their jobs or can no longer earn the same income they once were. This has resulted in many residential tenants being unable to pay their rent on time.

This is bad news for landlords, who are also under pressure to meet their monthly bond repayments. So what steps are available to landlords whose tenants can no longer honour their lease agreements?

WATCH : A Landlord's guide to dealing with a non-paying tenant

Penalties

According to Gunston Strandvik Attorneys Inc, late payment penalties are prohibited for residential leases in terms of the Rental Housing Act 50 of 1999.

Section 3(c)(i) of the Unfair Practices Regulations states that a lease agreement cannot include a provision which imposes a penalty for late payment of rent, whether or not the penalty takes the form of an administrative charge or any form other than interest.

Although landlords may not charge an administration or penalty fee for late payments, they are permitted to charge interest on late payments. This means that residential tenants are entitled to demand that their landlords remove such late payment penalties from their invoices.

Note that the regulation prohibiting penalties applies only to residential leases, and the law does allow late payment penalties in commercial and retail leases.

Remedies

Gunston Strandvik recommends that landlords do the following when dealing with late-paying tenants:

  • First, contact the tenants to query the late payment. If they state that they have problems and ask for an extension, we advise working with them to reach an agreement. Everyone is feeling the pressure, so that a little kindness can go a long way.
  • If the tenants still don’t pay the rental on the agreed date, you should send a written letter outlining that they are in breach of contract. The letter should state that the tenants have seven days in which to pay the outstanding amount - unless otherwise stipulated in the lease agreement. The letter should also inform the tenants of your intention to report the payment default to the credit bureau if the payment is not made within the specified time. This can be done 20 days after the letter is received by the tenants.
  • If the tenants fail to make the payment within seven days of receiving the breach of contract letter, you must ensure that the tenants receive a written notice to cancel the lease agreement. This letter must indicate that the tenants must immediately vacate the property.
  • If the tenants fail to leave the property, you will need to seek legal assistance to proceed with an eviction order.

Dealing with defaulting tenants can be difficult for many people; the key is to do everything within the law.

Writer : Sarah-Jane Meyer

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