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Demystifying the damage deposit

21 Nov 2013

The use of a tenant’s rental deposit is an issue that can cause friction between the landlord and tenant – one which is subject to certain misconceptions from both parties.

While it is now generally understood that the landlord should put the deposit in a bank account where it earns interest every month, this rarely happens in reality.

When a tenant vacates a property leaving it in a clean and damage-free state, having consistently paid their rent on time, they expect their full deposit to be returned to them, and are unpleasantly surprised when they receive a list from the landlord detailing charges for what the landlord deems ‘fair wear and tear’.

Marlon Shevelew, Director of Marlon Shevelew and Associates Inc, bbelieves that in order to avoid things turning ugly, it is vital for both parties to be aware of their legal rights in the landlord/tenant relationship, as set out in both the Rental Housing Act (RHA) and, more recently, the Consumer Protection Act (CPA).

According to the RHA, a landlord is not permitted to charge a tenant for ‘fair wear and tear’, as tenants are not liable for deterioration or depreciation in the value of the subject matter by ordinary and reasonable use.

Shevelew says placing the responsibility on the tenant for damages, whether in a residential or commercial lease, would also probably violate the prohibition of unfair, unreasonable and unjust contract terms contained in the CPA.

The CPA has fundamentally changed the way business is done in South Africa. It requires businesses to transform the way in which they interact with consumers and to ensure that all their dealings with consumers are fair, reasonable and honest. 

This includes the way in which property owners interact with their prospective tenants.

While it is now generally understood that the landlord should put the deposit in a bank account where it earns interest every month, this rarely happens in reality. In most cases, the landlord simply puts the deposit in his cheque account and calculates the interest it would have earned in the interest bearing account and simply adds it on at the end of the rental period.

As a result, the tenant feels the need to protect himself and does not pay the last month’s rent in lieu of the deposit.

Martin Goodman, Director of Rentshield, says there are rules applicable to deposits and landlords are required to follow these rules or face penalties. The deposit must be invested by the landlord in an interest-bearing account with a financial institution and the landlord must pay the tenant such interest at the rate applicable to the relevant account with that financial institution.

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.

The standard rule is that, if a tenant damages something that does not normally wear out or substantially shortens the life of such an item, the landlord is entitled to charge him for the prorated cost of that item, taking into account its age, how long it might otherwise have lasted and the cost of replacing the item. 

In addition, a landlord may only charge a tenant for cleaning that is necessary to satisfy the average or reasonable incoming tenant. For example, a tenant may be charged for the elimination of fleas left behind by their pets or for costs incurred in the removal of decals from walls or windows.

Goodman believes that, from the tenant’s perspective, it is important to know the history of the rented premises and to ensure that a comprehensive incoming inspection is done in their presence.

He says when it comes to the landlord it is important to ensure that potential tenants are properly vetted before any contracts are signed.

In addition to providing landlords with a comprehensive online tenant vetting facility and conducting thorough in and out inspections at the beginning and end of each occupation, he says Rentshield renders the issue of the tenant’s deposit null and void.

"This cutting edge ‘zero deposit’ product allows the landlord to forego the initial hefty deposit requirement, which often acts as a deterrent to potential tenants. While this ‘zero deposit’ offering is hugely appealing to tenants, the benefits for landlords are numerous, as they are protected for almost every eventuality."

This broad spectrum of services empowers landlords to be more efficient with their finances and investments, says Goodman. 

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