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Tenant's Deposit: What's The Point?

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Tenant's Deposit: What's The Point?


Few realise that a tenant's deposit is not a legal requirement when renting and is completely at the option of the landlord.



"However, if the landlord does demand a deposit, the Rental Housing Act ("the Act") sets out a number of procedures that need to be followed," warns Heather Briggs of Durban law firm, Shepstone & Wylie Attorneys. "Many landlords are unaware of all the requirements and need to become familiar with the Act."

She explains that the deposit is designed to be used by the landlord once the lease has ended to cover any arrear rentals, money owing to the landlord or for expenses required to return the premise to their original state when the lease began.

"It is essential that a joint inspection of the premises is carried out before the tenant moves in and again on the termination of the lease in order to make a comparison. A landlord who fails to inspect the property jointly with the tenant is deemed to have acknowledged that the premises are in a good state of repair, " Briggs explains.

Furthermore, the deposit may only be used to pay the last month's rental if the landlord agrees to such. If a tenant leaves without giving notice, the rent is still payable until the lease expires. In this case a landlord can choose to use the deposit to cover the rental during this period.

"The amount of the deposit does not have to be equal to one month's rental but may be any amount that the parties agree to. However, the deposit must be paid before the tenant moves into the premises," she advises.

Once the tenant has paid their deposit the Act requires the landlord to issue a detailed receipt and then invest the deposit in an interest bearing account for the benefit of the tenant. The landlord is then obliged to provide written proof of the accrued interest to the tenant upon request. The one exception to this is if the deposit is kept by the landlord's estate agent. In accordance with the Estate Agency Affairs Act, the interest will accrue to the Estate Agents Fidelity Fund and not the tenant.

Once the lease expires, the Act sets out when the deposit must be refunded. The length of time is depended on the repairs necessary being seven days after expiration of the lease if no repairs and 14 days if there are repairs to be done. If a tenant refuses to carry out a joint inspection of the premises before the lease expires, the landlord has seven days there-after to complete an inspection of his own. The landlord must then attend to any necessary repairs and refund the balance of the deposit, if any, to the tenant within 21 days of the expiration of the lease.

The landlord is advised to keep a record of all receipts as proof of the repairs carried out as the tenant is entitled to inspect what amounts have been deducted from the deposit.

Briggs warns that if the money owing to the landlord and the cost of the repairs incurred exceed the deposit plus interest, the landlord can take legal action and claim the balance owing plus their legal costs from the tenant.

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Disclaimer: The information presented and opinions expressed herein are those of the authors and do not necessarily represent the views of Estates Report and/or its partners.