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Ask a lawyer – Is the agency entitled to a portion of the tenant’s penalty fee?

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What does the law say with regards to late payment penalty fees and, should the tenant pay this, what portion is due to the owner and what portion is due to the agency?

Please take into consideration that the lease agreement makes provision for the late payment penalty fee of 15% to be charged. The clause in the lease agreement states as follows:

“LATE PAYMENT: The TENANT hereby agrees that should any rental not be received by THE AGENCY by due date or should any cheque or debit order payment be dishonoured by the bank, he/she will pay a charge of 15% of the rental amount to THE AGENCY”


Having regard to the contents of the lease agreement, as well as the nature of the respective relationships between landlord and tenant, and landlord and agent, I am of the view that the clause of the lease agreement entitles the landlord to impose a late payment charge in circumstances where the tenant does not pay his/her rental in accordance with the terms of the lease.

Accordingly, the charges to be imposed would constitute an amount due to the landlord, and not an amount due to your agency. Your agency merely charges the tenant, and collects the amount on the landlord’s behalf. This is so, notwithstanding reference to THE AGENCY being entitled to charge the tenant a penalty in the clause of the lease agreement.

In this regard, I note that it is in fact the landlord who has contracted with the tenant, and that your entitlement to payment of remuneration as agent arises from your rental mandate concluded with the landlord.

Thus, you are remunerated for managing the rental on the landlord’s behalf, and your entitlement to remuneration is limited to the commission due to you for services rendered to the landlord.

Ultimately, the purpose of a late payment charge is to ensure that the landlord is not out of pocket as a result of any costs that s/he may incur as a result of the tenant’s breach of the lease and/or failure to make timeous payment.

Legally, the landlord is more than entitled to charge a late payment fee/penalty, as this is an express term of the written agreement concluded between the parties, and there are no issues arising from the provisions of the Consumer Protection Act that require special consideration, or that would limit the landlord’s entitlement to levy a late payment penalty in this instance.

Who is Marlon Shevelew?

Marlon Shevelew, director of Marlon Shevelew and Associates.

Marlon Shevelew, director of Marlon Shevelew and Associates.

Marlon Shevelew is the director of Marlon Shevelew and Associates Inc., a Cape Town-based law firm specialising in rental property, contractual, consumer and company law. Marlon is the previous author of the TPN Residential Leasepack, the current author of PayProp’s rental documentation and preferred rental property attorney to the Institute of Estate Agents South Africa, the Rental Housing Tribunal Western Cape, presenter of the Advanced Residential Property Law Seminar endorsed by the University of Cape Town and the director of the top rental property law firm in the country, according to several international publications. Marlon also created the unique Rental Retainer Club and RentDoc which offers clients affordable legal fees for rental property-related matters.



Review overview
  • Denis 30th September 2016

    I am intrigued, I refer the author of this article to Section 3 (3)(a) of the Gauteng unfair practices regulations of 2001 read in conjunction with Section 15 of the Rental Housing Act namely

    3.(3) A lease agreement must exclude any provision which—
    (a) Imposes a penalty for late payment of rent whether or not the penalty takes the form of administrative charge
    or any other form other than interest;

    and ask the author to reconcile same and to include a calculation for illustrative purposes.

    It is my submission the example is an administrative charge represented as a percentage of the lease amount.

    In the pursuit of accuracy, this fee is to compensate the landlord for losses actually incurred. This is thus not due to the agent and thus the agent is not entitled to any benefit thereof.