As the well-known saying goes, “It is too late to lock the stable door once the horse has bolted”. This means that it is only through completing and signing a lease agreement upfront that certainty in the event of a dispute is provided.
In a recent landmark decision, the Rental Housing Tribunal ruled that the reasonable penalty clause in Tenant Profile Network’s (TPN) residential lease agreement was legally compliant and should be upheld. The Tribunal further ruled on the question that arose as to whether a rental agent is entitled to retain a portion of the deposit as a reasonable penalty on behalf of the landlord. The Tribunal found that the rental agent in question could retain an amount of R8,500 from the initial deposit of R42,450, over and above the costs the tenants agreed to have deducted from the deposit for maintenance issues relating to the property.
The dispute centred on the failure to refund a deposit as the result of early termination of the lease agreement by the tenant, as is required in terms of section 5(3) of the Rental Housing Act. More specifically, there was a disagreement between the tenant and the landlord regarding who was liable for the estate agent’s commission.
This ruling finally provides some much-needed clarity on the provisions of Section 14 of the CPA when it comes to lease agreements. More specifically, it confirms that the CPA applies to leases (it is the first ruling to deal with penalties and a claim for damages relating specifically to an estate agent’s pro-rata commission).
The ruling further goes to show that when a dispute arises, it is imperative to have a quality lease agreement in place that is up-to-date, carefully drafted and takes all relevant legislation into account. Precisely what the Tribunal would have ruled had the lease agreement not contained a clause dealing with the issue of early termination is anyone’s guess!
Michelle Dickens, MD of TPN says, “We are confident that landlords who make use of well-drafted lease agreements such as our LeasePack, and who calculate the reasonable penalty on actual damages will find themselves comfortably able to argue their case.”