Tenants, is your deposit’s interest going to the EAAB?
Hello, in the article Can a tenant under debt review be denied a rental home? dated 25 July 2017 I saw the following:
“If the deposit is held by the estate agent, the deposit must be held in a trust account. The interest earned on the trust account is payable to the Estate Agency Affairs Board unless the lease agreement provides that the interest is paid to the tenant”.
Is this according to the act? I will be glad to know which act it is. I have seen quite a few leases in my life but I never saw anything about interest in any lease. This is the first time I hear that the interest of the deposit could be paid the Estate Agency Affairs Board.
I also question the fairness of this? Surely the interest should be paid to the tenant. If the tenant was not renting a place he/she could be earning rent on that money he/she paid as deposit the landlord or rental agency. – Johannes
Hi Johannes, it seems to be a little known fact, even by experienced property professionals, that Section 32(2)c of The Estate Agency Affairs Act read with Regulation 9.2 of the EAAB Code of Conduct provides that interest is payable to the Fidelity Fund on money that is deposited into a trust or any other interest-bearing account.
When receiving money into the trust account, estate agents must disclose that unless parties agree in writing to whom the interest earned on the trust money is to be paid, the interest will automatically accrue in favour of the Estate Agents Fidelity Fund. Estate agents may, however, elect to retain 50% of the interest earned when payment is made to the EAAB. The tenant can therefore receive the interest on the deposit but it has to be agreed to in writing.
The TPN LeasePack provides for this in the schedule of the five different lease agreements on offer. This is in the form of a tick box which clearly indicates whether the interest on the deposit is to accrue to the ‘Tenant’ or the ‘Agent & the EAAB’. It is strongly advised that such a provision be included in all lease agreements to ensure that the tenant is aware of this legislative requirement and to naturally avoid the high potential for disputes from arising.
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Answered by Michelle Dickens, MD of credit bureau, TPN