Refunding the Rental Deposit

A large proportion of rental disputes that appear before the Rental Housing Tribunal arise from disputes regarding the handling and returning of a tenant’s deposit and the interest that has accrued on that deposit.

In a recent interview with the SABC, TPN Managing Director, Michelle Dickens set out the importance of securing a rental deposit: “typically a rental deposit is paid as security over damages that might accrue to the property or in the event that there is outstanding electricity at the end of the lease, that deposit can be used once the tenant has vacated the property to offset any of the damages.”

The deposit must be held in an interest bearing account

The 2008 amended Rental Housing Act states that interest on a deposit must be held in an interest bearing account equivalent to a savings account with a financial institution which interest will be for the benefit of the tenant.

It is important to remember that a tenant’s deposit cannot be used during the course of a lease agreement and must be reserved for the end of the lease when damages to the property caused by the tenant needs to be rectified.

Avoid this mistake!

One of the biggest mistakes landlords and agents make is using the deposit during the course of a lease agreement to set it off against arrear rental.

The result is that the deposit is never replaced and subsequently at the end of the lease period, the tenant vacates the property leaving behind a substantial damages bill that the landlord will have difficulty recovering through the courts. It is better to avoid this all together and rather than apply the deposit to the arrear rent, send a letter of demand to the tenant to begin the process of cancelling the lease agreement.

Reserve the deposit for physical damages

This allows the deposit to be reserved for the fixing of physical damages once the tenant has vacated the property giving the landlord the option of loading a default listing for the arrear rental rather than having to undertake the task of taking legal action for damages through the courts.

The Rental Housing Act has specifically legislated the procedure for the handling of deposits and the importance of adhering to it cannot be stressed enough! The procedure can work together with the default listing process under the National Credit Act to create a streamlined course of action that fully protects the landlord from a delinquent tenant that has not paid and who has caused damage to the property during the term of the lease agreement.

To see Michelle’s full interview with the SABC, click here

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