As you know, most landlords ask for a rental deposit from tenants before you move into a property. They have this right according to Section 5 of the Rental Housing Act, No. 50 of 1999. This article will take you through what happens to your rental deposit, and also shed some light on the “why’s”, the “what’s”, and the “how much?” of rental deposits.
How much should you expect to pay?
The lease agreement states the amount that you have to pay as a deposit. This can typically amount to the equivalent of one month’s rent or even two or three months’ rent as a deposit.
Why do you need to pay a deposit?
The deposit acts as a safeguard for landlords against damages and unpaid rent - which only comes into play after the lease concludes. This means that tenants cannot ask to use the deposit as rent at any stage during their lease. If a landlord must evict a tenant, they can also use the deposit to help pay for the legal costs connected to an eviction process. The Prevention of Illegal Eviction from Unlawful Occupation of Land Act (PIE Act), No. 19 of 1998, protects the tenant against illegal eviction procedures.
What may the landlord deduct from the rental deposit?
As a starting point, the landlord may not use the deposit for general maintenance or upkeep of the property. But they may deduct the cost of repairing damages to the property which may have occurred during your lease. Once the repairs are done, you can ask to see all the repair receipts to confirm that they spent the money to repair the damages you caused to the property.
Where does your deposit go?
If the landlord chooses to work through a managing rental agent, the tenant will then typically pay the rental deposit to the real estate agency and they will put it into an interest-bearing bank account. If you work directly with your landlord, you pay your rental deposit to them, who then by law also have to put it into an interest-bearing bank account. The rental deposit remains your money, even if it’s paid to your landlord or real estate agent. They merely hold the money as security if you should break the rental agreement. Because the rent deposit remains your money, at any time during your lease, you can ask for a statement of the interest earned on that amount.
Rental deposit when a lease runs its normal course
When your lease comes to an end, and there are no damages other than wear and tear, your landlord must refund your deposit - and interest - within seven days of the termination date.
Rental deposit when there are damages or rent was not paid
After the lease expires, the rental deposit with interest earned, must be paid over to you within 14 days, minus any allowable deductions if an amount is owed to the landlord.
Rental deposit when the lease agreement is broken and leads to an eviction
The eviction process is lengthy, and it can take at least eight to ten weeks to get an eviction order. While waiting for the eviction order to be granted, the landlord will suffer a financial loss because they will not be earning any rental income. Also, the landlord will have to pay the legal costs connected to the eviction process. An unopposed eviction could cost anywhere between R15,000 and R20,000+ in legal fees plus disbursements. However, if you contest the eviction, the legal costs will be substantially more. This is a worst-case scenario and one of the main reasons that landlords often want more than a month’s rent as a deposit.
Where to go for help
If you opt to work through a real estate agent, they are your first point of contact. You can also turn to your province’s Rental Housing Tribunal for help. The tribunal is available to mediate and resolve disputes between you and your landlord.
A last word
Before you sign a lease, make sure you know both your rights and responsibilities as a tenant and what is involved with rental deposits. Understanding these can help prevent unpleasant and costly disputes down the line. For professional advice about your rentals and deposits - speak to your local RE/MAX real estate agent.
Have more unanswered questions? Here are some related questions – and answers – that might help…
Will I lose my deposit if I move out early?
Moving out early may lead to forfeiting your deposit, but this depends on your lease agreement. Please read carefully what your lease agreement says about early termination and potentially losing your deposit.
What if my landlord did not invest the rental deposit in an interest-bearing account?
Landlords are legally required to invest rental deposits into an interest-bearing account. If they do not, and from a legal point of view, the deposit is deemed - accepted - to have been invested. This means that at the end of the lease, the landlord must refund the deposit, plus the equivalent interest amount, minus any legitimate deductions.
