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Who should hold the rental deposit?

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This week the Property Poser experts deal with the issue of who should hold the deposit on a rental property.

A reader writes that he recently purchased a unit in a sectional title complex with the specific intention of renting it out.

The letting agents have advised him that they should be holding the deposit in their trust account. The reader is concerned however that the ultimate responsibility for the deposit, and, specifically the refunding thereof with interest, lies with him.

He is particularly concerned that, should there by any maladministration or misappropriation of the deposit, he would still be responsible for the refund.

According to Susan Chapman from Rawson Properties Port Elizabeth Platinum, a deposit is held by a landlord to ensure that the landlord has recourse and access to funds should, for example, the property be damaged by the tenant during the lease period.

“Once the landlord has deducted the damages and any other claims that he may legally deduct from the deposit, he or she must refund the remaining balance, with the interest, to the tenant.”

Chapman says the Rental Housing Act regulates the holding of the deposit taken by a landlord at the start of a lease.

“The deposit must be held in an interest-bearing account, with an interest rate not less than that of a savings account, for the benefit of the tenant.”

The landlord must provide proof of the deposit held in this manner on request from the tenant, says Chapman.

“The Act specifically states that the landlord is responsible for dealing with the deposit. Without taking the matter further, the reader would be quite correct in thinking that the ultimate responsibility lies with him.”

If, however, one examines the definitions listed in the Act, it is evident that the concept of the “landlord” has been expanded upon, says Stiaan Jonker of Smith Tabata Attorneys in PE.

“Thus, ‘landlord’ means the owner of a leased dwelling and includes his or her duly authorised agent, or a person who is in lawful possession of a dwelling and has the right to lease or sub-lease it.”

In the current instance the letting agents would be within their rights to receive and invest the deposit should they fulfil the provisions of the definition of “landlord”, says Jonker.

“Where the landlord is represented by a duly authorised agent, the agent is then obliged to abide by the provision relating to the holding of a deposit.”

Jonker says in such an instance the deposit and interest should be dealt with in accordance with the provisions set out in the Estate Agency Affairs Act.

“It would thus appear that the agents’ assertion that they should hold the deposit is quite correct.”

Should the reader not wish this to be the case, it may be possible to limit the agents’ mandate to the extent that he desires, says Jonker.

“Alternatively, the reader could deal with the property and its rental personally.”

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Fullstop

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