Dear Rental Agent
The end of this year is approaching, much to the amazement of most of us! In our industry time is always too short and the end of the month arrives far too fast. We have barely chased up the late and non payers before we are back on the hamster wheel again! In between we are expected to maintain relationships with landlords and tenants and keep ourselves trained and up to date with all latest legislation and methods.
I believe that the job of a rental agent is far more complicated than is perceived from most landlords. This is why I am constantly keeping you in touch with recent cases and methods of improving your daily work schedule. Give us input as to your wants and needs. We would be happy to accommodate you with specific requests.
Community Schemes Ombud Service
I have recently met with Maletsatsi Wotini who heads the new ombud service in the Western & Eastern Cape. The chief task of this ombud is to nationally provide an alternative, independent and impartial service for disputes in community schemes i.e. sectional title, share block, home ownership, housing co-operatives and retirement villages.
It will affect your rentals because levies will have to be increased. There are full details on our website in two podcasts to which you should listen.
Interest on Deposits
Many cases have come up recently whereby tenants are not receiving interest on their deposits on termination of their lease agreements. The strong defense of rental agents is that their lease agreements have a clause stating that interest on deposits will not be paid to the tenant on termination of the lease.
The following questions should be asked:
Is this legal?
It can depend on the initial arrangement made between a landlord and tenant keeping in mind that it is a legal right of the tenant to receive interest. Many Muslim tenants refuse interest as it does not tally with their faith.
Is the landlord or agent entitled to retain the interest?
The Rental Housing Act permits only a registered estate agency with an arrangement made with the EAAB whereby a percentage of interest is paid to the EAAB
What does the legislation say?
The Rental Housing Act expects all interest to be paid to a tenant unless the landlord/agent is a registered estate agent.
Is a private landlord exempt from paying interest?
No. Interest at a savings account rate must be paid.
Does the Rental Housing Act apply to a private landlord?
How much interest has to be paid?
At the current savings account rate
What can tenants do if their interest is not paid?
Lodge a case with the Rental Housing Tribunal
What are the provisions of the Rental Housing Act about interest on deposits?
Chapter 3 Clause 5 (3) (c) & (d) concerns the payment of deposits and interest. The amount of deposit is negotiated between the landlord and tenant. The amount of deposit is not legislated. The deposit must be invested by the landlord/agent in an interest bearing account at a savings account rate and the landlord must pay the tenant the interest. The tenant is entitled to request the amount of interest at any time and it must be provided. Read this clause carefully.
This clause continues stating that should the landlord be a registered estate agent with the EAAB the deposit and interest should be dealt with as stated in the Estate Agency Affairs Act. Some agencies have an arrangement with the EAAB whereby 50% of the interest in their trust and business accounts is paid annually to the EAAB leaving the agency with the other 50% which is either absorbed by the agency or paid to a tenant. This needs to be made clear to a tenant prior to signing a lease agreement. Best to put it in the lease agreement.
Common law states that whoever pays a deposit is entitled to all interest on that deposit provided it has been requested by the person/tenant in writing. General practice is that either a standard request document is signed by a tenant agreeing that all interest will be paid to the tenant, or it is a provision in the lease agreement. The EAAB is fully aware of this. If this is your practice you should have the evidence to prove that tenants have requested all interest as is their common law right, or by agreement in the lease contract. Verbal confirmation is not sufficient.
Recently I have received reports of agencies that retain all interest on their deposit (note that interest is paid on all types of deposits) to the consternation of those tenants affected. This can be reported to the EAAB as a violation of the Code of Conduct or a case can be lodged in the Rental Housing Tribunal. According to the Consumer Protection Act a tenant is entitled to be informed about every aspect of any contract being signed.
Case on Unfair Deposit Deductions on Termination of a Lease
The tenant Mr M lodged a case in the Rental Tribunal about unfair charges for painting and electricity which were deducted from his deposit at the end of his lease. The apartment was rented through an agent of a large property firm. No joint inspection was conducted. A damages deposit of R4 000 was paid.
When the tenant moved into the property he found the property in a poor state with paint carelessly sloshed on the walls, flooring spotted with paint and dirty carpets in the bedrooms. He personally painted the walls and removed mould from the bathroom walls and ceiling.
On Mr M’s vacating two years later the agent deducted R2200 for painting, banks charges of R50, inspection fee of R250, electricity of R729 and cleaning of carpets of R500, returning R200 from a deposit of R4700. No interest was paid.
Two months after vacating the tenant went to visit a friend in the building and asked the current tenant of his previous flat if he could see it. The walls had not been painted nor had the carpets been cleaned.
The tenant maintained that there had not been a joint inspection, and that in fact the inspection form showing everything was in good order, had been signed in the agent’s offices at the time that the lease was signed.
The agent alleged that the hot water cylinder had burst during the tenant’s occupancy staining the walls, for which the tenant had to be responsible. The tenant had been given a chance to repaint but had refused as he was cash strapped.
The tenant had been a good tenant paying his rent and services each month on time.
It was noted that an amount of R450 had been paid by the tenant on the date that the lease was signed. It was discovered that this amount was for the account of the previous tenant that had not been deducted. The agent had insisted that the new tenant pay it to ensure that his had his electricity would be turned on! Needless to say the Rental Tribunal was unimpressed!
The outgoing inspection was not jointly conducted. The ruling was that with no joint inspections, though the tenant admitted that there were a few marks on the walls for which he would be prepared to pay.
The Tribunal ruling was that full deposit plus interest at a savings account rate should be returned less the amount of R500 for painting and R729 for the last electricity account. No other charges could be made as these were either not reflected in the lease agreement or could not be evidenced by correct joint inspections.
In conclusion remember we have an excellent on-line rental library with up-to-date training courses, information, podcasts and interviews with a variety of persons connected with the rental industry, and all extremely simple to access. Rates of subscription are reasonable.
It is less expensive to be well informed than to have to undergo a case in a court or tribunal. Every landlord expects their rental agent to have all the necessary knowledge to manage rental properties professionally.
There is no excuse for ignorance of the law!
We wish you an excellent festive season and look forward to your further interaction.