Damage deposits - when, how and if...

The repayment of the deposit at the end of a lease term is often a bone of contention.  Tenants sometimes do not want to pay the last month's rent - claiming that the deposit can be applied for it.  This is not the purpose of the deposit, which is also referred to as  a damage deposit or security deposit. With regards to applying the deposit for the last month's rent, it is interesting that in some other countries the last month's rent is payable upfront together with the deposit and first month's rent.

Deposit is defined as "a sum of money paid in relation to a rented item to ensure it is returned in good condition". This is usually an amount equal to a month's rent or two months'rent.  In terms of the Rental Housing Act the deposit  must be invested in an interest-bearing account with a financial institution, and the interest accrues to the tenant. 

When a tenant moves into a property, an inspection of the property is done and recorded. This can be done in writing only, but ideally a  photographic record should be done as well. The purpose of this is to record the condition of the property when the tenant takes occupancy. When the tenant moves out,  an inspection is done again to ascertain if any damage beyond normal wear and tear was caused to the property during the tenant's occupation. In short, a tenant is expected to hand a property back to the landlord in the same condition as it was received.

The Rental Housing Act stipulates:

"On the expiration of the lease, the landlord may apply such deposit and interest towards the payment of all amounts for which the tenant is liable under the said lease, including the reasonable cost of repairing damage to the dwelling during the lease period and the cost of replacing lost keys and the balance of the deposit and interest, if any, must then be refunded to the tenant by the landlord not later than 14 days of restoration of the dwelling to the landlord. "

Ideally a tenant will see to it that any damages are repaired before the moving-out inspection takes place. It will make life easier for the landlord or agent, and obviously it will speed up the repayment of the deposit. To have carpets cleaned, walls painted, broken windows repaired, lost keys replaced and the garden cleaned up, take a lot of time to organise. Contractors can not always do the job immediately, which also causes a delay. A tenant who is in a hurry to get back his deposit, should make sure that the property is spic and span when the inspection is done!

If no amounts are owing to the landlord, the deposit must be refunded within 7 days.

A practical problem arises because the amount outstanding for water and electricity is often not available when the deposit needs to be finalised and refunded. The only solution is to refund the deposit, but to retain an amount to cover the outstanding monies.

It is also important to note that failure by the tenant to inspect the dwelling with the landlord or his appointed agent despite being requested to do so, allows the landlord to do such an inspection  on his own within 7 days after expiry of the lease, and the deposit then only needs to be refunded within 21 days after the expiry of the lease.

If the landlord or his appointed agent fails to inspect the property, it is seen as an acknowledgement by the landlord that the property is in a good state, and the tenant must be refunded the full deposit.


Published in: December news


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