Tenant deposits: Oh, the horror!

Private Property South Africa
Martin Hatchuel

Google “lease agreements South African horror stories” and you’ll come up with about 1 280 000 results. “Rental deposits South African horror stories” gives you about 534 000. Even a casual stroll through our own web site – PrivateProperty.co.za – reveals articles like Lea Jacobs’ Wanted: Dead or Alive – Landlords Withholding Deposits.

Clearly the rental market is an area that could be a minefield – but it needn’t be, since our country has powerful legislation (and case law) that protects both tenants and landlords.

With a bit of thought – and knowledge based on thorough preparation – the landlord-tenant relationship should be a pleasant and mutually beneficial one. It begins with an agreement: and that agreement must include the question of the deposit.

Actually, although you do have to have a written contract for a lease agreement to be legal, there’s no obligation that requires the landlord to ask for a deposit.

Legal protection

The Rental Housing Amendments Bill (which was passed into law earlier this year) clearly states that, “A landlord may require a tenant, before moving into the dwelling, to pay a deposit” – but there are obligations on both parties if the landlord requires one.

Fortunately, South Africa is well served by civil society organisations whose research and advice are often available free of charge.

The informative and easy-to-read overview, “A Tenant's Guide to Rental Housing” (published by the Socio-economics Rights Institute of South Africa and the Centre for Urbanism and Built Environment Studies at Wits University in October 2013), makes the point that landlord and tenant must inspect the property together both before the tenant moves in, and within three days of the end of the rental period. “This is to assess if there is any damage caused during the time you were living at the property.”

Clarity on the deposit amount

The Rental Housing Amendments Bill states that the deposit amount may not exceed the amount agreed in the contract. Also, that the landlord is required to invest the deposit in an interest-bearing account with a financial institution, and that the account must yield at least the same rate of interest as the institution’s savings accounts would normally do.

During the period of the lease, the tenant has the right to request a written statement of account that reflects the interest accrued. But it’s at the end of the lease that things sometimes go awry.

Except where costs have been incurred in terms of the lease (and for which the landlord is required to show proof in the form of receipts), the landlord is required to refund the deposit in full, and pay the interest to the tenant within seven days of the end of the rental period. But once again, the Bill holds both parties responsible for their parts of the bargain. If the landlord fails to arrange an inspection of the property in the presence of the tenant within three days of the termination of the contract, this is “deemed to be an acknowledgement by the landlord that the dwelling is in a good and proper state of repair and the landlord will have no further claim against the tenant”. But if the tenant fails “to respond to the landlord’s request for an inspection” the landlord has the right to assess the premises within seven days of the end of the contract period.

Expenses and deposit deductions

The Bill is clear, too, on the expenses which the landlord may deduct from the deposit: “the reasonable cost of repairing damage to the dwelling and the cost of replacing lost keys, if any,” and it states that that the landlord may “claim compensation for damage to the ... rental housing property and damage to any other improvements on the land on which the dwelling is situated” – whether that damage was caused by the tenant, his or her, family, or his or her visitors.

The Amendment Bill is considered important partly because of a provision which requires the MECs for housing in each of the country’s provinces to establish Rental Housing Tribunals, whose main function is to settle disputes between landlords and tenants (see the Western Cape Government’s website for an example – probably a good source of information for anyone contemplating entering into a rental agreement). The significance here being that the original Act (the Rental Housing Act, No. 50 of 1999) allowed the MECs to choose whether they would establish these bodies or not. Now, however, everyone will have equal access to them – no matter where they live. A list of provincial contact details for the various tribunal offices can be found here.

Make sure that your rental agreement covers all the bases! Visit Private Property’s advice pages for more in-depth articles that discuss the sometimes fraught relationships between landlords and tenants.

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