When the lease on an apartment or house comes to an end, many tenants give up part or all of their deposits so the landlord can make good damage supposedly done by them. Even more tenants lose out on interest accrued on their deposits.
With residential property the law can be used to even up any such imbalances in favour of the landlord. Note that your rights in this regard are set to be strengthened when amendments to the Rental Housing Act come into effect (probably later this year).
Securing your deposit refund
In terms of the law, your landlord is required to meet with you prior to the lease commencing and draw up a list of defects or damage. This list is to be an annexure to the lease so make sure that anything problematical is recorded and can’t later be blamed on you.
Similarly, at the end of the lease, you and the landlord again inspect the premises to establish any damage caused during your occupation, as well as any other costs incurred by the landlord such as lost keys etc.
Should the landlord not attend either of these inspections, he forfeits the right to use the deposit plus interest on it to undertake repairs to the premises. The landlord is then required to return the full deposit and interest (if there is any) to you within seven days.
In addition, the landlord must show you receipts for any repairs undertaken if you request them (you should).
Insisting on these steps, plus taking care of the property, will protect you and help ensure your deposit is refunded.
Getting interest on your deposit
It makes a difference whether you deal with a landlord or with an estate agent –
- Where you deal with the landlord
When you deal directly with the landlord then the deposit must be invested in an interest bearing account with a bank. The interest rate cannot be less than the rate earned on a savings account.
On completion of the lease, the interest earned is refunded to you along with the deposit.
- Where you deal with an estate agent
This is governed by separate legislation and the terms of the lease are important. If the lease is silent on the interest, then the estate agent is obliged to pay this over to the Estate Agents’ Fidelity Fund. In practice, the agent gets 50% of this back from the Fund.
So always negotiate for the lease to reflect that the deposit must be paid into an interest bearing account and that the interest accrued is to be paid to you at the end of the lease. This negotiation is subject to market conditions – for example, tenants renting property in high demand areas like Cape Town’s Atlantic seaboard will not be in a strong bargaining position.
But, if you are a commercial tenant …..
The above applies to residential property. In commercial property leases, there is no law compelling landlords to invest a deposit in an interest bearing account for the benefit of the tenant. However where you are dealing with an estate agent the situation is the same as with residential property. Again, make sure the lease itself specifies that you will be paid interest on your deposit.
This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)