What to do with rental deposits

Private Property South Africa

When it comes to the management of rental properties, there is one thing that often causes a dispute, and that is how a tenant’s deposit has been handled, what he is due to be refunded at the end of the lease period, and what constitutes a failure to refund the said deposit.

Landlords and rental agents acting on behalf of the landlord should remember that they need to refer to the Rental Housing Act, and should stick the provisions therein, says Sunell Afrika, rentals manager at property company, SAProperty.com.

This section of the RHA says:

5 (c) The landlord may require a tenant, before moving into the dwelling, to pay a deposit.

5(d) The deposit contemplated in paragraph (c) must be invested in an interest bearing account with a financial institution that may not be less than the rate applicable to a savings account with that financial institutions, and the landlord must subject to paragraph (g) pay the tenant interest at the rate applicable to such account which may not be less than the rate applicable to a savings account with a financial institution and the tenant may during the period of the lease request the landlord to provide him or her with written proof in respect of interest accrued on such deposit and the landlord must provide such proof on request.

5(e) The tenant and the landlord must jointly, before the tenant moves into the dwelling, inspect the dwelling to ascertain the existence or not of any defects or damage therein with a view to determining the landlord’s responsibility for rectifying any defects or damage or with a view to registering such defects or damage.

5(f) At the expiration of the lease the landlord and tenant must arrange a joint inspection of dwelling at a mutually convenient time to take place within a period of 3 days prior to such expiration to ascertain if there was any damage caused to the dwelling during the tenant’s occupation.

5(g) On expiration of the lease the landlord may apply such deposit and interest towards the payments of all amounts for which the tenant is liable under the said lease, balance of the deposit and interest must be refunded to the tenant by the landlord not later than 14 days of restoration of the dwelling to the landlord.

5(h) The relevant receipts which indicate the costs which the landlord incurred, must be available to the tenant for inspection as proof of such costs incurred by the landlord.

Every tenant accepts that he will pay a deposit before he takes occupation of a rental property, and this amount varies from the equivalent of one month’s rent to three – although the majority ask for two months’ rent as a deposit.

This deposit has to go into a separate interest-bearing account and landlords must resist the urge to use that money for any other purpose. Even though it is being held by the landlord or the rental agent, it still belongs to the tenant until such time it can be shown that damage incurred or losses to the landlord need to be recouped from that amount, says Afrika.

The best way to protect both tenant and landlord is to stick to the provision of the RHA and do both incoming and outgoing inspections together. Documenting any faults or damages to the property with corresponding photographs is an accurate way of recording these as the photos will be date-stamped and can easily be stored or emailed to all parties concerned. Once the lease period is up, the photos can then be referred to as comparisons with the current state of the property, says Afrika.

See more: How to find the right tenant

If there are items found to be damaged by the tenant, the landlord must be prepared to show the quotes and invoices to the tenant of the repair in question and prove that the amounts deducted from the deposit are accurate and fair. Tenants must also accept that if they are responsible for damage to the property or have neglected their responsibilities according to the lease (i.e. perhaps maintenance of the pool or garden), they will have to pay to restore the property, says Afrika.

“If both tenants and landlords stick to the rules provided, there is clear instruction as to what needs to be done, which streamlines the payment and refund process,” says Afrika.

Read more: Top 5 things landlords should budget for

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