The rundown on rental deposits
Rental relationships can put individuals in precarious situations, something that has become all too clear amid the effects of the COVID-19 pandemic. Landlords are, however, aware of the possibility of unforeseen events turning a mutually beneficial arrangement on its head and thus prepare accordingly for these eventualities. This is why rental deposits are a staple of every rental agreement.
One of the primary uses of rental deposits is to cover accumulating costs when tenants default on their rental payments and the eviction process begins. In such a case, landlords have to bear in mind that the Prevention of Illegal Eviction from Unlawful Occupation of Land Act, No. 19 of 1998, protects the rights of the tenants, which forces landlords to follow strict procedures during evictions.
When following protocol, legal evictions can take up to ten weeks to be finalised, leaving the landlord with more than two months’ uncollected rent. The legal costs for this process, which can range from R12 000 to R20 000 for an unopposed eviction, is then added onto that already hefty financial burden. This is why the Rental Housing Act, No. 50 of 1999, entitles landlords to obtain a deposit before a rental agreement is entered into.
Generally, landlords request a deposit that equals to between one and three months’ rent. The Rental Housing Act stipulates that this deposit must be kept in an account with an established financial institution, where it can earn interest throughout the rental agreement’s term. The initial deposit, along with any interest accrued during the rental period, is then paid back to the tenant at the end of the rental agreement, as long as no deductions are made for reparations or outstanding payable amounts. Tenants are legally allowed to request statements of the account in which their deposit is kept, as the money still technically belongs to the tenant.
When no reparation expenses are deducted, tenants should receive their deposit back within seven days of the agreement’s termination. When reparations are needed, the remainder of the deposit, after expenses have been deducted, must be refunded within 14 days of the agreement’s termination. In both of these cases, documentation is vital. Tenants must be supplied with adequate documentation of the interest their accounts accrued over the rental period, as well as invoices and receipts for any amounts that were deducted from the deposit.
Rental deposits may only be used by the landlord for specific events (e.g. to cover defaulting rent or the reparation of property damage), and may not, for instance, be used to pay for the general maintenance of the property. Whenever tenants or landlords find themselves at odds over the use of a deposit, they are advised to approach their district’s Rental Housing Tribunal, who can help to mediate these cases and assist the tenant(s) and landlord alike to come to the fairest possible resolution.
Rental relationships can become precarious, especially when defaulted payments come into play, but they don’t need to: not when both parties work together towards finding the best solution to the problems at hand.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).