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Landlord lacks interest in deposit


Written for Property Poser

A tenant has approached the Property Poser panel with an oft-repeated complaint about a landlord who has dealt improperly with his deposit.

The reader explains that he gave verbal notice to his landlord that he would be vacating the property, which the landlord duly accepted.

An inspection of the property followed but, when it came to returning the deposit, it turned out that the landlord had never deposited it in an interest-bearing account for the tenant's benefit.

The landlord maintained that it was agreed upon in the lease that the monies were to be deposited in his own bank account and that the agreement did not specify more clearly where it should be held.

Sean Radue of Radue Attorneys in Port Elizabeth says the agreement between landlord and tenant should be adhered to at all times, subject to anything that overrides it.

The way in which matters are set out in this agreement describes how they should be dealt with in the event of a dispute between the parties, says Radue.

"This is also why it's so important to examine a lease agreement properly to ensure that it provides for most potential issues that may arise between the parties."

Radue says one of the very typical clauses that appears in lease agreements, and in fact other agreements, is that any actions or omissions by any of the parties are not to be seen as an amendment to the terms and conditions contained in the written agreement.

"There's also legislation to keep in mind. Whatever the parties agree upon in their contract cannot generally exclude the provisions contained in the relevant legislation."

One such an important piece of legislation is the Rental Housing Act, says Radue.

"This legislation aims to protect both landlord and tenant, by providing for certain compulsory actions by the respective parties, regardless of whether provision for it had been made in a written or verbal agreement between them."

Radue says one such provision provides that "the deposit . . . must be invested by the landlord in an interest-bearing account with a financial institution".

Furthermore legislation states, according to him, that the landlord must "pay the tenant interest at the rate applicable to such an account which may not be less than the rate applicable to a savings account with a financial institution".

During the lease period, the tenant may request that the landlord provide him or her with written proof of the interest accrued on the deposit, which the landlord is then obligated to provide, says Radue.

"Despite what is contained in the Act, the landlord argues that the parties had agreed otherwise."

Radue says the reader does not mention whether the agreement was put down in writing but, if this were the case, all provisions relating to the lease must be contained in the document.

"The parties can't rely on extraneous matters to change the agreement."

The provision in the Act is peremptory and does not allow a choice as to what can be done with the deposit, says Radue.

"The word 'must' in the said provision is key to its interpretation. Any agreement to the contrary could, at best, be considered in mitigation of the landlord's failure to comply."

Radue says the landlord's contravention of the Act may be viewed as "unfair practice" that reasonably prejudices the right of the tenant and he may refer this to a housing tribunal in his area to settle the dispute.

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