Rental properties came under some strain during the pandemic lockdown levels. It’s been somewhat of a minefield with requests for landlords to consider financial constraints on tenant’s, having tenant’s ‘stuck’ or unable to move during level 5, and how best to recover any lost rents. For some landlords it meant consideration given to those in plight, for others it was a situation that demanded compliance to regulations.
Michelle Dickens, Managing Director at TPN Credit Bureau explains that all residential rental properties are regulated in terms of the Rental Housing Act (RHA), and regardless of whether leases are verbal or written, a minimum amount of information must be discussed or provided, and agreed to by both the tenant and landlord.
“Obviously there should be clear clarification of who is landlord and who is the tenant, a full description of the property and its address, and the value of the rent being charged. More detail is required in terms of the lease term. For instance, is it fixed or month-to-month? If fixed, that lease may not be greater than 24 months in terms of the Consumer Protection Act (CPA), but it may be extended thereafter.
“The law also requires that certain responsibilities be discussed and adhered to by both parties. Among those are that the landlord must hand over the property fit-for-the-purpose for which it was let; that the tenant must pay rent according to agreed terms; and that any deposit must be held in a savings account owned by the landlord or be held in an estate agents’ trust account and that the deposit cannot be used as the last month’s rent.”
Deposits are likely one of the most misunderstood aspects of rental agreement requirements but the RHA is very specific in this regard. Dickens explains that in essence a deposit is necessary to settle any property damages claim the landlord has against the tenant, and to settle any outstanding arrears of the lease account such as rent and utilities. “Should there be a damages claim against the deposit, and this includes settling a utility account, the balance of the deposit must be refunded 14 days after restoration or fixing of the property, or in receipt of the final utility account.
If there are no damages claimed, the deposit is refunded seven days after the end of the lease agreement. What is important to note is that during the period that the landlord has the deposit in their care, there is an obligation to pay the tenant interest on that amount when the deposit is refunded, which is why such funds must be deposited with a financial institution. However this is not the case in terms of an Estate Agent Trust account as the interest secured in this instance is payable to the Estate Agents Affairs Board.
Both estate agents and landlords are also legally allowed, and should, recommends Dickens, ask potential tenants to prove their legal standing by requesting personal details such as ID document, proof of current residence, and proof of bank details as a source of funds. “Estate Agents are bound to these rules because they are accountable to institutions like the Financial Intelligence Centre and its Acts, and are therefore also bound to ‘Know-Your-Client’ obligations,” says Dickens.
“In addition landlords and estate agents are permitted in terms of the NCA to profile their tenants for credit worthiness and affordability, for which consent of the tenant is required and is confirmed and incorporated in the lease agreement.
Despite a rental agreement being a legally binding document, there are cases when a tenant, either intentionally or otherwise, may fall in breach, such as not being able to pay the rent. In such cases the landlord has the right to demand the tenant remedy the breach, and by agreement may be able to reach some sort of settlement. However if the tenant fails to comply, the landlord can cancel the lease and demand the tenant vacate the property immediately. Dickens says that on month-to-month contracts, the breach must be remedied within seven days, and for fixed term agreements, the tenant is allowed 20 business days to remedy.
Similarly a 20 business day notice is required from the tenant if they wish to cancel the lease. The tenant is then liable for the 20 business day rental period AND a reasonable penalty for early cancellation. What is considered reasonable is the same terms as applied to tenants moving out without their landlord’s knowledge.
“When this happens, the landlord can hold the tenant liable for rent due, and the aforementioned reasonable penalty, which includes loss of rent while the property is vacant, commissions paid for originally placing the tenant, and costs for marketing the property for new tenancy placement,” confirms Dickens.
What Dickens makes clear is that landlords who are compromised by a tenant breaching the lease, are prohibited from locking the tenant out, disconnecting utilities or removing a tenant’s property. “These are criminal offences and a tenant can report this to the Rental Housing Tribunal. Landlords must follow due legal process.”
TPN offers a comprehensive LeasePack, which is a package of all need-to-knows, and documentation relative to residential property rentals. Dickens advises that whether you do-it-yourself or outsource to a rental agent, always credit check your applicant to secure a quality tenant and sign a written lease agreement.