The lowdown on rental deposits

Are deposits necessary? When can they be retained? And how much can be asked for? 

In terms of the Rental Housing Act, a tenant is not legally obliged to pay a deposit, but the landlord is legally allowed to ask for one.

Rental or security deposits are standard practice in tenancy agreements in South Africa, according to attorney Simon Dippenaar.

How deposits work

The deposit provides security for a number of possible eventualities including a tenant who decided to abscond, failed to pay the final month's rent or caused damage to the property. The deposit must be specified in the lease agreement, with the amount stipulated. Both parties must agree on it.

It is generally paid either with the first month's rent or when the lease is signed, prior to occupancy.

How much?

"Whether the landlord asks for a deposit worth one, two or even three months' rent is a private matter, but once the deposit is received the treatment of it is regulated," explains Dippenaar.

The deposit must be held in an interest-bearing account. The interest rate paid on the account holding the deposit must be equivalent to the bank's main savings account rate.

What can it pay for?

At the end of the tenancy, the landlord is liable to repay the deposit (less any legitimate deductions) plus interest.

When the deposit is paid, the landlord should issue the tenant with a written receipt showing the tenant's name, date, amount of deposit and the address for the property the deposit relates to. On request, the tenant must be provided with proof of accrued interest.

Dippenaar further explains that in South Africa the law does not make a distinction between a security deposit and a rent deposit. In some jurisdictions, a landlord may ask for a "last month's rent" as financial insurance against the tenant absconding and not paying the final rental instalment. Such a deposit can only be used for that purpose and may not be applied towards repairs or cleaning.

A security deposit, however, can be used to cover whatever costs the tenant might incur or leave unpaid.

"A landlord who asks for two months' rent up front may indeed be thinking in terms of part security and part rent insurance. But from the tenant's perspective there is no distinction under South African law," says Dippenaar.

The landlord is entitled to deduct any costs associated with damages incurred during the lease – apart from normal wear and tear. Expenses that can be covered include replacement of lost keys or remotes, and any outstanding utility bills, as well as repairs.

The tenant is entitled to the receipts for any repairs carried out by the landlord or items purchased.

General maintenance is not a permitted deductible expense by the landlord.

Inspect, inspect, inspect

An often overlooked point, according to Dippenaar, is the requirement for a joint final inspection.

"Landlord and tenant should walk through the property together and note any issues. These can be compared to the initial inspection report to ascertain the degree of tenant liability," he says.

"If a tenant has held the lease for some years, it can be difficult to remember what state the property was in at the beginning of the tenancy. The moving-in report is a useful reminder."

Both parties are responsible for carrying out the joint inspection. It is in their interests to ensure the inspection complies with regulation, as no deductions may be made otherwise.

"If the landlord fails to carry out the inspection together with the tenant, by default the property is considered to be in a good state of repair and no deductions may be made," says Dippenaar.

"However, it is also in the tenant's interest to make sure the inspection happens, to ensure the landlord doesn't ignore the requirements of the act and claim for damages the tenant isn't present to deny. Even though the landlord would be in the wrong, there is no point inviting a legal battle."

* Compiled by Carin Smith

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