Written for Property Poser

The payment and return of rental deposits appears to be a hot topic, as another reader has approached the Property Poser panel about getting back the interest on a rather sizeable deposit.

The reader explains that, at the inception of his lease, he was obliged to pay a double deposit to the agency acting on behalf of the landlord. He found this odd as he was sharing the dwelling with the landlord and so, presumably, the chances of causing any damage to the dwelling was less likely.

The lease has since been terminated and the reader has sought the return of his deposit together with the interest accrued. The agency refuses to return the interest on the deposit, stating that any interest accrued on the deposit belongs to them.

According to Schalk van der Merwe from Rawson Properties in Somerset West, Cape Town, the Rental Housing Act states that the deposit amount is determined by the amount recorded in the lease or as otherwise agreed by the parties.

“The Act also sets out that a deposit should be invested in an interest-bearing account for the benefit of the tenant but subject to the applicability of the Estate Agency Affairs Act, in which case the relevant provisions should apply.”

Van der Merwe says the reader has provided two relevant extracts from his lease, the first of which states that “. . . this deposit amount will be placed in a bank account and the landlord will pay the tenant this amount plus interest earned when the lease ends if the tenant does not owe any money to the landlord for any of the reasons provided for . . .”

The agreement also makes provision for the situation where the deposit is given to an estate agent and not the landlord, stating that the “. . . agent will invest the deposit either in a bank or in accordance with the rules of the Estate Agency Affairs Act”.

As his contract specifically provides for the return of this deposit together with interest thereon, the reader is of the opinion that the refusal of the agent to refund his interest amounts to breach of contract.

Assuming that the provisions and definitions of the Act relating to agents have been met, the second clause may have some bearing on the agent’s obligation, says Van der Merwe.

“Where the funds are not immediately required for a specific purpose, the Estate Agency Affairs Act details the manner in which an agent must deal with another person’s monies.”

Grant Hill of Miller Bosman Le Roux Attorneys in Somerset West says the monies are to be held in trust by the agent and can then be invested.

Hill says the Act states that interest on monies deposited in a trust account and on monies invested “. . . shall, subject to the express terms of the mandate in question, which shall be in writing, be paid to the (fidelity) fund by the estate agent concerned”.

This would appear to be the provision on which this matter turns, says Hill.

“A fidelity fund acts as a kind of insurance against the misappropriation and the like of the money in the trust account. In the event of such an incident, the fund would step in and probably make good the loss.”

Hill says the interest from the deposit would therefore generally go into the fidelity fund.

“We aren’t privy to the balance of the lease agreement and therefore can’t guess as to whether any other provisions address the requirements for the investment of the deposit or the return of the interest.”

Based solely on the cited clause, it would appear that the agent is given full discretion to apply the industry-specific legislation, says Hill.

“In the absence of a mandate to the contrary, the interest would be payable to the fidelity fund and not the tenant.”

Hill says this instance highlights the importance of properly negotiating the provisions of a lease agreement as the amount of money held as a deposit can, in some instances, be considerable and be held for a lengthy period of time, which could equate to a fair amount of interest.

“Where an agent is involved, it would be useful for the agent, as a professional with knowledge beyond that of the parties, to explain the provisions of the lease agreement and the implications of any applicable legislation.”

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Issued by:

Full Stop Communications

Coetzee Gouws
082 575 7991
041 368 4992

On behalf of:

Rawson Properties Helderberg and Miller Bosman Le Roux Attorneys