What is the right security deposit amount

The security deposit that landlords request from the tenant secures the protection of their rental investment. Therefore, it is vital to ensure that the deposit sum is considerable enough to cover the rental property, says Grant ReaRE/MAX Living Rental Specialist, who works in the Cape Town City Bowl, Atlantic Seaboard and Southern suburbs.

“Either the landlord or their rental agent needs to ensure that they accurately estimate the level of damage deposit the property requires. Historically, a one-month security damage deposit was the norm and it proved generally sufficient in covering damages left by the tenant and the costs of restoring a property to the condition it was in at commencement of the lease. However, in today’s volatile economic times with the average tenant spending a significant portion of their disposable income on rent, there are more defaults than ever.  Generally anything less than two months’ security deposit leaves the landlord at risk of financial loss in the event that their tenant defaults on their last month’s rent or leaves the property with extensive and costly repairs,” says Rea. 

He adds that a scenario recently faced by a client, where the tenants had divorced, resulted in the tenants giving notice to vacate, with one spouse moving out prematurely. The consequent financial upheaval meant that they did not pay the last month’s rent.  Despite the lease prohibiting this and the tenants receiving notice of the breach of contract with impending legal action - they still did not pay the rent. As a result, the landlord deducted the last month’s rental from their security deposit, which equated to one and a half months rent.

“Unfortunately, within that last month of their lease, the tenant who remained in the property left it in a less than desirable condition. With only half a month’s deposit remaining to restore all the damages, the landlord had to pay towards damages and the consequent legal costs in an effort to recover the funds. This proved a futile waste of time and money. A higher deposit would have remedied this situation,” advises Rea.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that ideally landlords should have money set aside for unforeseen circumstances such as, issues that are not covered by the home insurance and legal costs should the tenant default. This way they will not be in financial trouble if they are required to pay certain expenses from their own account.  He advises that between 5% and 8% of the monthly rental amount should be set aside each month as a precautionary measure.

According to Rea, it is advisable to make deductions off deposits for damages first and to take legal action in the recovery of the outstanding rental as a material part of the lease.

“One must always ensure higher deposits, as in the above mentioned scenario, despite the tenant being exemplary over a two-year period, the demise of their personal relationship, resulted in severe delinquency. It is important to note that a tenant’s conduct and payment regularity can deteriorate swiftly, with hardly any evidence or warning,” says Rea. “Therefore it is best to ensure that the landlord allow themselves leverage, reduced risk and increasing the protection of their property through obtaining a higher security damage deposits,” he concludes.

For additional property related advice contact Grant Rea, RE/MAX Living Rental Specialist on 076 493 3520 or 021 423 4488.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us