What If The Rental Lease Is Silent On The Matter Of Interest On The Deposit?

It often happens that a landlord and tenant’s written or oral agreement omits to mention what should happen to the deposit and the interest that accrued thereon during the lease, on termination thereof. 

Perhaps unknown to many, the Rental Housing Act has certain deemed provisions that apply to residential lease agreements, the word ‘deemed’ implicating that the Act’s provisions apply whether or not the parties actually agreed on those terms. Some of these relate to the deposit and interest that accrued thereon. These provide, in short, that although there is no statutory obligation to pay a deposit, where the parties indeed agree on a deposit, it should be applied to make good damage that resulted from the tenancy, if any, and the balance returned to the tenant on termination, within prescribed periods. Pending termination, the deposit must otherwise remain invested in an interest bearing account at a bank, interest accruing for the benefit of the tenant. 

The Act contains more details relating to the rate of interest, what the deposit must be used for and the position where an agent acts on behalf of the landlord. 

Applicable Law

If you rent directly from the owner of a property, the deeming provisions in section 5 of the Rental Housing Act (“RHA”) state that your deposit and interest must be managed as follows:

Section 5: Provisions pertaining to leases

(c) The landlord may require a tenant, before moving into the dwelling, to pay a deposit which, at the time, may not exceed an amount equivalent to an amount specified in the agreement or otherwise agreed to between the parties.

(d) The landlord must invest the deposit in an interest-bearing account with a financial institution. The landlord must, subject to paragraph (g), pay the tenant interest at the rate applicable to such account which may not be less than the rate applicable to a savings account with that institution. The tenant is entitled to ask the landlord to provide him with written proof of the interest that is accruing on the deposit, and the landlord must provide him with such proof.

The above subsection is subject to paragraph (g) which paragraph states:

(g) On 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. The balance of the deposit and interest, if any, must be refunded to the tenant by the landlord not later than 14 days of restoration of the dwelling to the landlord.

The Act also requires landlords to provide tenants with a receipt for the deposit, which states the date on which the deposit was paid, the amount, the name of the tenant, the address for which the deposit was paid, the type of dwelling (house, flat, cottage), and the landlord’s name and signature.

In conclusion

The RHA does not oblige landlords to require a deposit from the tenant in respect of a lease agreement entered into by and between the parties thereto. The Act merely entitles a landlord to legally request a deposit from the tenant. However, when a tenant pays a deposit, the landlord is obliged by the Act to place the deposit into an interest-bearing account with a financial institution. The minimum interest rate may not be less than a savings rate with the financial institution. The tenant may request at any time during their tenancy that the landlord must provide written proof of the accrued interest.

When the lease expires:

• If there is no damage to the property, the full deposit and interest must be paid to the tenant within 7 (seven) days of the lease’s expiration date. Section 5(i) of the Act.

• If there is damage to the property, the landlord is entitled to use the deposit and interest to offset amounts the tenant owes, including the reasonable cost of repairing damage to the dwelling while the tenant occupied it. The remainder of the money must then be refunded to the tenant no later than 14 (fourteen) days after the restoration of the property as dictated by the Act. If repairs are completed on the home, the tenant can request to see all repair receipts to confirm that the money was spent to repair the damage they did to the property. The landlord cannot use the deposit for general maintenance or upkeep of the property. Sections 5(g) and (h) of the Act.

Contact us on info@stbb.co.za should you requires assistance with a lease agreement or dispute.