Early lease cancellation: Who bags the deposit?
The Rental Housing Act states that an outgoing inspection should be arranged within seven days after the tenant vacates the property. Should one of the parties, however, fail to attend the arranged inspection, the other party is allowed to inspect the property on their own and compile a list of any damages caused to the property. This list will then be sufficient proof to deduct the damage listed from the deposit. The damage is quantified, usually by obtaining quotations from two or three service providers, and deducted from the deposit. The remainder of the deposit must then be refunded to the tenant within 14 days.
The situation often arises where a lease agreement is concluded and a legally binding contract comes into being, the deposit is paid, but shortly before the lessee can take occupation of the property the lease agreement is cancelled by the lessee. The question in this situation is: Who is entitled to the deposit? Unfortunately, the answer will differ from case to case and each should be judged on its own merits.
In one scenario, the lessee cancels the agreement at such a time that the landlord cannot secure a new tenant, resulting in a loss of income. In this case the landlord will have the right to receive, at least the deposit, as a reasonable cancellation penalty, as contemplated in the Consumer Protection Act, since he reserved the property for that lessee. If there was an estate agent who placed the lessee, the estate agent will be allowed to receive commission for the placement. This might not be a full placement fee, but a reasonable fee to compensate the agent for the services rendered.
In another scenario, the landlord was able to secure a new tenant in time and did not suffer any damages. In this instance, the landlord is not entitled to receive the deposit or a part thereof since no damages were suffered and hence, no justification to receive any compensation. A landlord withholding the deposit, or part thereof in a case like this, would have been unduly enriched unless for example, an estate agent was involved and commission was payable. The estate agent is allowed to receive commission which may then be subtracted from the deposit. Alternatively, if the landlord paid the commission for the placement to the agent the landlord will be allowed to receive the amount paid to the agent from the deposit. The remainder, if any, of the deposit needs to be refunded to the tenant.
This article first appeared on SSLR Inc’s blog and is reproduced here with the kind permission of the author
Who is Cilna Steyn?
Cilna Steyn, MD of SSLR Inc, completed her LLB Degree at Unisa, after which she was admitted as an attorney in 2007. She co-founded Steyn & Steyn Attorneys, where she began specialising in evictions.
She regularly presents training sessions, where she advises groups of rental agents and private landlords on matters relating to landlord and tenant disputes and broader scope property law-related matters. She also acts on the panel of experts for the Law Society of South Africa’s Legal Education and Development. She presents seminars on behalf of LSSA: LEAD, educating attorneys nationally on eviction procedures and rental claims. She is one of the drafting attorneys of the TPN (Tenant Profile Network) Residential Lease Pack.
Cilna authored The Landlord’s Guide – Property Rental and Eviction in 2015 and regularly publishes articles in newspapers and peer-review magazines. She also appears on television and radio, participating in discussions relating to property law and, in particular, evictions. As the managing director she is dedicated to leading SSLR Inc in accordance with its core values.
Cilna is passionate about property and understands the pressures of being a landlord. Her attention to detail and knowledge of property law makes for efficient evictions.