Your fuss-free guide to rental security deposits
Category General News
When tenants find their dream property, they'll need to pay certain costs to secure their home. The rental security deposit (also known as a damage deposit) is one of them. The Rental Housing Act (No. 50 of 1999) legally empowers landlords to request this upfront as part of the rental agreement. Typically a standard practice, it's also a good way for landlords to protect their assets and end their rental relationship with tenants on a positive note.
What is a rental security deposit?
Before a tenant moves into a property, the landlord can take a deposit; an amount that must be clearly stipulated in the lease agreement. Although this is not compulsory, most landlords will do this to safeguard their rental business.
What is a rental security deposit used for?
The deposit plays an important role in the rental process. It allows landlords to cover costs related to breaches in the lease agreement, damage to their property, rent shortfalls, and non-payment of utilities.
During tough times, some landlords can allow tenants to use the deposit in lieu of rent. However, this is not advisable in the instance the tenant is unable to pay their rent again or fails to provide another deposit. The deposit should also not be used to cover the last month's rent before a tenant vacates the property in case the funds will be needed to cover unexpected expenses.
How much is a rental security deposit?
The Rental Housing Act doesn't define the exact amount. Generally, the deposit is equal to one month's rent. However, it's not unusual for landlords to ask for an amount equal to two or three month's rent if they've had challenges with defaulting tenants or evicting tenants.
What happens to the rental security deposit?
Before occupation: While the rental security deposit amount isn't set in stone, the process when it is received is outlined by the Rental Housing Act. The landlord or their property manager must invest the deposit in an interest-bearing account with a recognised financial institution. Any interest accrued should be returned to the tenant along with the deposit when they vacate the property provided it is not used to cover costs.
During occupation: At any point during the lease period, the tenant can ask the landlord for written proof of the interest accrued. It's important to note that while the landlord/property manager is paid the deposit, it remains the tenant's funds and are kept as a security measure if the tenant breaches the rental agreement.
After occupation: When the lease expires, the landlord or their property manager has 21 days to inspect the property. If there are any costs or repairs required, these will be deducted from the security deposit. The tenant should also be provided with receipts indicating the cost of repairs. Once the repairs are done, the landlord/property manager must refund the tenant with any remaining funds from the deposit within 14 days of the restoration.
Where there are no expenses or if an inspection is not conducted within the timeframe, the balance of the deposit and accrued interest must be returned to the tenant within 7 days of the lease termination.
Rental security deposits tips for landlords
- Opt for two deposits: With rising utility costs, landlords should request a separate utility deposit to cover potential accounts in arrears. The alternative is to install prepaid electricity metres.
- Invest in a savings account: Rather than lock funds in an investment account, the deposit should be placed in a simple savings account. This means there are few (if any) penalties for early withdrawal of funds if the tenant leaves before the lease expires.
- Create a paper trail: When the deposit is paid, landlords should ensure they issue tenants with a written statement. If costs are deducted from the deposit, the tenant should also be given evidence of the repair work done or expenses paid.
- Partner with a professional: There are instances where the deposit has been stolen by unscrupulous property managers. Landlords signing up for this service should ensure their representatives are registered with the PPRA and have a good reputation in the industry.
Rental security deposits tips for tenants
- Read the lease agreement: It's important to be clear on how the deposit works and the rules that govern a tenancy. This will prevent disputes and help tenants secure their full deposit at the end of the lease.
- Take inspections seriously: Tenants should ensure they attend all inspections. At the start, they should take care to confirm the current state of the property along with the landlord/property manager. The lease agreement should include photographic evidence so both the tenant and landlord are clear on the condition of the property.
- Ask for comparative quotes: If the tenant is liable for damages, the landlord will use the deposit to make repairs. However, the tenant can request to see comparative quotes to confirm the work has been done within the standard industry pricing.
- Respect the property: By leaving the property in the same state it was accepted, tenants can ensure their deposit is fully refunded. All accounts should also be paid in full before notice is given so there aren't any delays in releasing the deposit.
Make rental security deposits a breeze
Kellaprince Properties has the largest residential rental department in Mbombela (previously Nelspruit). Our experienced and competent team works full-time to help tenants and landlords meet their real estate goals. Tenants can count on us to demystify rental security deposits at the onset while landlords can benefit from property management services that prevent deposit disputes. Get in touch with our team today.
Author: Kellaprince Properties