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Monday Oct 31, 2016

Rental deposits don't belong to landlords or agents

Relationships between landlords and tenants are rarely easy. The wrong tenants can ruin properties, squat or cripple landlords financially, while landlords can be just as crooked, particularly when they don't bother to maintain their assets, charge extortionate rentals and retain deposits for no good reason.

Last week's impassioned letter from the landlord "lost for words", whose tenants who ruined his garden, kept destructive dogs and threatened to shoot him, drove home a point that many landlords make about their tenants: once people have occupied your premises, the law is on their side as it becomes a ruinously expensive exercise to get them evicted.

Which is why a proper risk assessment needs to be conducted to determine the suitability of potential tenants. It's not fail-safe, but armed with a credit report, recommendations from previous landlords and the deposit, you have some leverage.

But signing a contract, whether it's a lease or purchase agreement, based on a cursory glance at a property on "show day" can be risky.

One of my first houses was signed on the basis that it had a magical "fairy" garden and a lovely swimming pool - and my dogs wouldn't get bored. Only once we moved in did we realise this wasn't a solid investment: the traffic to get out of our street was impossible, the kitchen was impractically small, the tiles were dangerously slippery, the rooms were tiny, the lovely pool had a bad leak...

When Nonku Hlongwa found a rental property in Lonehill in April last year, she had more practical considerations in mind: she thought it was a nice neighbourhood that was conveniently close to her workplace. She had paid a total of R34 000 for the deposit and rent, and once she moved in, carefully noted all the snags in the house. Then she realised that list was worrisomely long and there were immense issues.

It was bearable for the first few months, but it emerged the house wasn't suitable for habitation. When the roof leaked all over her bed and she started becoming extremely concerned about the black mould in the house, she realised this was a mistake that was putting her family's health at risk.

The landlady and agents failed to act on her requests to attend to the most problematic issues for months on end so she cancelled the lease and moved out.

This was in May. She still doesn't have her deposit back and the landlord and agents are shifting the blame. The agents say she cancelled the lease so she's not entitled to her deposit, while the landlord claims Hlongwa caused the damage so she has kept it to defray costs, which would have been reasonable had she not fixed items on the snag list with that deposit.

"One of the things she claimed she needed to replace were the curtains. When I moved in, I took the filthy curtains off and packed them away safely in a cupboard so I could put my own up. I agreed that her filthy old curtains needed to be replaced but I said: not at my expense," Hlongwa said.

To prove her point, she asked an engineer for a structural assessment. His report said the issues were mostly structural and due to a lack of maintenance for a "considerable while".

The Rental Housing requires that deposits be kept in interest-bearing accounts. If the tenant wants proof of accrued interest, the landlord or agent must provide it.

Hlongwa's lawyer, Trudie Broekmann, said: "Under the CPA, since the lease is a fixed-term agreement, the innocent party - the tenant in this case - has the right to cancel a contract on 20 business days' notice.

"But further, if it's a serious enough defect, amounting to a breach of contract by the landlord, who needs to provide habitable premises, the tenant can also cancel - it doesn't matter what the lease says, it's a common-law principle."

And the deposit doesn't belong to the landlord - it remains the property of the tenant, Broekmann said.

The agents maintain they were not party to the lease agreement, stating through their lawyers: "The initial agreement of lease concluded between (Hlongwa) and the landlord was administered by the landlord. Our client was approached after the lease agreement was concluded. The rental/damage deposit in respect of the property was effected by (Hlongwa) to the landlord directly, into the banking details provided by the landlord, as agreed and envisaged by the Rental Housing Act (RHA) 50 of 1999. Neither the landlord, nor your client, at any stage, effected payment of any funds in respect of a deposit into our client's deposit trust banking account."

However, the lease clearly states the agreement is between Rental Pro's "on behalf of owner" and Hlongwa and the owner claims she gave the deposit to the agents, along with interest.

In a letter of demand in September, Broekmann observed: "Sections 48 and 68 of the CPA prohibit a supplier such as the landlord and rental agent from treating a consumer unfairly, or from penalising them when they exercise their rights.

"We are instructed that the rental agent has threatened not to return our client's deposit to her on her departure from the property. Please note that this would amount to a contravention of not only the lease, but of inter alia sections 64 and 65 of the CPA.

"In the light of the lengthy period of non-compliance with the law, our client further demands reimbursement of her legal fees (which currently stand at R13 000) plus the cost of the attached expert's report (R5 000). We consequently demand payment of the total amount of R35 000 plus interest on the deposit."

Crucially, the RHA requires an incoming and outgoing inspection, which is tied to the deposit. Hlongwa said both were conducted. The landlord must refund the deposit within seven days after the lease has expired but if money is owed, they have 14 days within which to do so. If repairs need to be effected, the landlord has 21 days from the expiry of the lease to carry them out and refund the balance of the deposit. Of course, the costs of those repairs must be proven.

It's something the Estate Agency Affairs Board might want to act on. The lease clearly states the agents had signed with the tenant and they should have ensured her deposit was kept safely - not paid to the landlord.

Ask Georgie
The Star


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