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Wednesday Sep 05, 2012

Property rent rises: all you need to know

The Rental Housing Act 50 of 1999 (the act) states in section 5(6) that a lease must include the following information:

  • The names of the tenant and the landlord and their addresses in the Republic for the purposes of formal communication.

  • The description of the dwelling which is the subject of the lease.

  • The amount of rental of the dwelling and reasonable escalation, if any, to be paid in terms of the lease.

  • If rentals are not paid on monthly basis, then the frequency of rental payments to be paid.

  • The amount of the deposit, if any.

  • The lease period, or, if there is no lease period determined, the notice period requested for termination of the lease.

  • Obligations of the tenant and the landlord, which must not detract from the provisions of subsection (3) or the regulations relating to unfair practice.

  • The amount of the rental, and any other charges payable in addition to the rental in respect of the property.

  • A rental escalation or increase must be reasonable and must be stated in the lease.

    The act also refers to exploitative rentals as being an unfair practice (13(4)(c)(iii)), but fails to provide any guideline regarding what is "reasonable" or "exploitative" or how often an increase can be introduced.

    To complicate matters, the act gives the Rental Housing Tribunals in each province the power to determine rentals that are just and equitable to parties by considering several factors (s13(5)):

  • The prevailing economic conditions of supply and demand.

  • The need for a realistic return on investment for investors in rental housing.

  • The incentives, mechanisms, norms and standards and other measures introduced by the minister in terms of the policy framework on rental housing referred to in section 2(3).

    There has been an undersupply for almost a century in SA. In fact, the undersupply resulting from the two world wars led to the rent legislation or rent control in most countries, which still applies in parts of Africa and the US. South Africa abolished the Rent Control Act in 2002 to pander to the demands of big business.

    The prevailing economic conditions in themselves demand a "better deal" for struggling tenants, and the undersupply of rental housing makes it an absolute necessity to protect the poor.

    The provincial Rental Housing Tribunals have failed to stop the escalation of rentals by setting the bar to the level of the prevailing market trends or even way above market-related rentals.

    The only incentive the minister introduced was the abolition of rent-control legislation that provided a somewhat obscured and outdated "protection" to tenants.

    Given the act as it stands, parties must approach the provincial tribunals to resolve their dispute.

    The most challenging disputes are based on oral agreements. The act recognises both oral and written agreements (s5(1)) but then makes certain requirements non-negotiable that are deemed to be included in a written lease (s5(6)).

    This is one of several unintended consequences in the act and ought to be interpreted to include oral leases.

    In other words, strictly applied, a landlord cannot increase rentals unless there is agreement at the outset of what the amount or percentage of the increase is and when this would come into effect.

    The same would apply to any other charges to be paid by the tenant that must be agreed to when concluding the terms of the lease.

    It would be wise to record the terms of an oral lease to prevent disputes or to provide grounds in support of a rental increase.

    In the instance where the landlord during the lease period decides to increase the rentals due to an increase in the levy, the tenant is not obliged to pay such an increase unless there was a prior agreement.

    However, the tenant cannot refuse an increase if she agreed that any increase in the landlord's sectional title levy or other specific expenses such as municipal costs relating to rates, sewage and refuse would be passed on to to her.

    The tribunal would be under duty to uphold the landlord's legitimate claim should the tenant lodge a complaint.

    How it factors in supply and demand and divides it by the landlord's realistic return and the tenant's economic status, is another matter.

    Dr Sayed Iqbal Mohamed, chairman, Organisation of Civic Rights.

    Daily News

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