Security Deposits: the how, when and why

With high debt-to-disposable income levels and the difficulty of obtaining a home loan still a factor, more and more South Africans are opting to rent property. While this is good news for landlords; the truth is that a lender/lessee relationship, like any other, is not without its issues.

A Common Source of Friction

Landlords and tenants often find themselves on opposing sides when what should be a straightforward business agreement goes south. "We have found that one of the biggest problems with rental properties relates to security deposits", says Harry van der Linde, principal agent at Leapfrog Moreleta Park.

What Security Deposits Are for

Van der Linde explains that many tenants rely on their security deposits being returned in full; in order to secure the lease on a new property. When deductions are made from the deposit issues arise. "A security deposit is required to rectify any damaged to the property upon the termination of a tenant's lease", says Harry, " it also covers things like getting the carpets washed, or the walls repainted which is all deducted from the deposit. As such it is rare for a tenant to receive his or her complete deposit upon moving".

What Happens to a Security Deposit?

By law a landlord needs to keep the deposit in an interest-bearing account or in a trust account in the case of a managing agent for the duration of the lease. Should there be repairs needed upon leaving the property, the tenant is entitled to the entire rental deposit plus any accrued interest. Should any moneys be required for repairs it will be deducted from this amount.

"When working with a rental agent it is always in the owner and tenant's best interests to ascertain that the agent is registered with the EAAB (the Estate Agent's Affairs Board)", advises van der Linde, "As it speaks not only to their credibility, but also ensures that parties have recourse in the event of any problems".

Repayment of Security Deposits

Another frequent source of complaint relates to when the deposit amount is repaid. According to the Rental Housing Act (Act 50 of 1999;)the remainder of the security deposit has to be paid to the tenant "no later than 14 days of restoration of the dwelling" and all relevant receipts are to be made available for the tenant's inspection. Should no restoration be required, the full deposit (and any accrued interest) must be paid to the tenant "within 7 days of the expiration of the lease". 

Harry recommends that tenants keep the above in mind as they often rely on getting their deposits back quickly, and in full, to secure their next accommodation. Based on the state of the current property this can take time - placing them under pressure and even leading to them losing out on their next rental.

Where to Lodge Complaints

Aggrieved parties can turn to the EAAB or the Rental Housing Tribunal (on 0860 106 166); the tribunal was formed in 2001 and serves to inform landlords and tenants about their rights and obligations, as well as helping to resolve any disputes.

"I suggest that landlords work through managing agents as we specialise in working with tenants and rental contracts - and generally succeed in mediating any issues regarding the property. Because of this I view the RHT and the EAAB as last resorts; when dealing with an agent the onus is on us to ensure proper conduct and compliance which also makes matters easier for both the landlord and tenant", says van der Linde.

Both landlords and prospective tenants will do well to familiarise themselves with the legal requirements when it comes to accepting and repaying security deposits. Knowledge of the relevant procedures can do much to prevent unpleasant and costly disputes later on.

Leapfrog Property Group is SA's only empowered real estate group and has grown to over 30 franchises nationwide since opening its doors in 2007. 

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