We have a tenant that rented a property through our agency and remains in the property. The tenant’s employer paid the deposit for the tenant by EFT and has proof thereof. The lease is in the name of the tenant. The tenant subsequently resigned from her employment and the employer would like to ensure that when the tenant leaves the rented property that the deposit is refunded to him, not the tenant. Can this be done?
In short, agents are obliged to repay deposits held in trust to the owner of that deposit thereof – who will always be the tenant, whose legal right of ownership of the money derives from the lease agreement – regardless of the actual source of the payment.
When the tenant’s employer transferred the deposit amount to the agent by EFT, he did so on the tenant’s behalf.
Once the amount was received and deposited in an interest-bearing account in accordance with the Rental Housing Act and Estate Agency Affairs Act, the funds became the property of the tenant and may only be released to the tenant (or utilised to repair damages or cover rental arrears etc.) upon expiry of the lease, in terms of the provisions of the aforesaid Acts and as stipulated in the lease itself.
It follows that the employer has no claim against the agent or the landlord for repayment, however, for sake of completeness, it warrants mentioning that the employer does appear to retain the right to pursue a claim against the tenant for repayment of monies lent and advanced in terms of an oral loan agreement between himself and the tenant. The fact that the loan amount was paid directly to a third party does not affect the nature of the underlying agreement.
To illustrate by analogy, consider a situation where a loan is made to cover a rental payment, and for convenience sake the amount is paid directly to the landlord. Would the employer pursue his claim in that case against the landlord, or would he accept that he is compelled to demand payment from the tenant? The same applies here – the fact that the deposit is being held in a trust account does not change the nature of their agreement, the terms of which neither the landlord nor the agent are a party.
For what it’s worth, one might also argue in these circumstances that it was a tacit term of their loan agreement (unless the parties are shown to have expressly agreed otherwise) that repayment would only fall due after the tenant has vacated the property and the deposit has been refunded.
For this reason, there is no practical difference to the employer whether the repayment comes from the agent or the tenant, however the agent has a legal duty not to repay any amount to the employer unless the lease agreement expressly stipulates as such
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Who is Marlon Shevelew?
Marlon Shevelew is the director of Marlon Shevelew and Associates Inc. a law firm specialising in rental property, contractual, consumer and company law.