What happens to my deposit paid for the lease of a residential property?

depositIt is general practice for landlords to request a deposit from their tenants before they move into a property – usually equal to 1 or 2 months’ rent.  This deposit is required to enable the landlord to rectify any damage to the property or to provide for outstanding rental payments upon the termination of a tenant’s lease. These costs will be deducted from the deposit before the balance is paid back to the tenant.

The purpose of a deposit, and what should be done with it at the expiration of a lease, is regulated by the Rental Housing Act No. 50 of 1999 (the “Rental Act”).

The Rental Act links the refunding or withholding of tenants’ deposits to an inspection of the property/premises.  It firstly makes provision for a joint inspection of the property by the landlord and the tenant before the tenant moves in.  Landlords may not withhold a deposit for defects that were there before the tenant moved in and the tenant is obliged to hand over the dwelling in a state of good repair, save for fair wear and tear.

If the landlord does not inspect the property with the tenant, prior to entering into the agreement or on termination thereof, he or she is deemed to acknowledge that the property is in a good and proper state of repair, and will have no further claim against the tenant who must then be refunded the full deposit plus interest.  Failure by either party to attend an inspection will severely prejudice their respective rights to claim against the deposit (in the case of the landlord) or to have the deposit refunded (in the case of the tenant).

It is important that tenants know and understand their rights. Rental deposits always remain an issue of dispute between landlords and tenants upon termination of a lease. What monies can and cannot be deducted? What about my interest? What if the landlord did not invest my deposit? When can I get my money back?

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