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Rental deposit

Tenant red flags and how to avoid them

By | Lease Agreement, Rent, Rental deposit, Tenants

Tenant Red Flags

Reprinted from Engineering News – 2022-03-24

The residential property industry continues its upward trajectory, and investors are getting in on the action. However, with the rise of investors choosing to take advantage of low prices and invest in ‘buy-to-let’ properties comes an excess supply of rental properties in areas with high supply and low demand.

Residential rental vacancies in Gauteng are currently sitting at a high rate of 11.9%, while the Western Cape is sitting at a slightly lower 11.4% vacancy rate according to TPN’s 2021 Q4 data.

Although landlords may be getting desperate, industry experts advise you to think twice before signing on the first tenant who comes your way. Explains Grant Smee, Managing Director of Only Realty, and property entrepreneur: “Placing a tenant in your vacant property might help curb your losses in the short-term, but putting the wrong tenant in can have a lasting negative effect.”

He adds that the law protects both the landlord and the tenant’s rights and therefore urges parties to do their due diligence prior to signing a lease agreement. Speaking to tenant’s obligations, Smee highlights “the requirement to pay rent promptly, to take care of the property and to return the property in the same condition that it was received in.” Landlords, on the other hand, are required to provide the tenant with access to a safe home in good working order. They are also required to maintain the exterior of the building and to protect the tenant’s deposit.

Smee adds while some properties are enjoying an influx of rental applications, others are desperately seeking tenants, both of which are at risk. “Receiving a rental application is a big relief for a landlord, so much so, that they often overlook red flags.”

Unfortunately, the price of avoiding the warning signs and securing a problem tenant carries a high price for landlords. This is because evicting tenants is a long and costly process in South Africa, and requires landlords to serve tenants with a ‘tenant eviction notice’ before they are entitled to a court hearing. “Even if the court process rules in the landlord’s favour, only a court-appointed sheriff is allowed to remove the tenant’s belongings, and this process can take weeks if not months,” warns Smee.

While some of these red flags can be avoided by using a reputable letting agent (and agency), some red flags are often overlooked.

The obvious red flags

A poor credit score: “A credit score refers to ones’ ability to pay back their debt on time. The COVID-19 pandemic has further exacerbated high levels of debt in South Africa, and this will be a prevalent issue for years to come,” says Smee. “Prior to signing on a tenant, a thorough credit check should be run. A credit score of 610-plus is acceptable.”

Affordability: “The general rule of thumb is that your monthly rental should not exceed 30% of your monthly salary,” says Smee. An assessment of a prospective tenant’s affordability will give a landlord a clearer idea of their monthly income and expenditure. “Agents and landlords should ensure that the tenant has enough income left over to pay their rent, electricity, and water (where required).”

References: A tenant will require a reference from previous landlords to determine their behaviours as  tenant. “A reference tells the landlord who the tenant is and if they are reliable or not. If the prospective tenant has no prior rental history, they will need to either arrange a co-signature on their lease agreement or can offer to put another credible reference- such an employer – forward.”

The not-so-obvious red flags

Smee lists the potential red flags that many landlords overlook in the tenant screening process:

Employment history: “Employment is hard to come by, however, some prospective tenants’ short employment histories can tell a different story. Job hoppers or people who run into trouble in the workplace can sometimes display these behaviours in their home life too.”

Criminal history: “Performing a criminal background check may sound extreme but this is a standard part of the hiring process in many industries and rentals should be no different. Some companies such as TPN provide a SAPS criminal background check to landlords as part of their Credit Check offering to ensure that your tenant is safe, honest and reliable.”

General behaviour: “Quite often there are red flags from the very first engagement with a tenant. In some cases, they are hard to reach or can be extremely difficult and demanding for no apparent reason,” he explains. “This is another reason why it’s important to use a rental agent whose judgement you can trust.”

Ensuring a good tenant-landlord relationship

Smee offers the following advice for those wanting to ensure a smooth relationship:

Always communicate: “In cases where the tenant already occupies the property, be sure to communicate and put everything in writing. Remain calm and rational should something go wrong and seek advice from estate agents and lawyers (where necessary).”

Don’t be fooled by fast cash: “Don’t fall into the trap of accepting a large sum of cash upfront in lieu of regular rental payments. Just because they have the money now, doesn’t mean they’ll have it in four month’s time when the next payment is due.”

Don’t rush: “In cases where the tenant is dragging their feet about signing the rental agreement, don’t lose hope yet. Try your best to clearly communicate, perform all the necessary checks, answer any questions they may have and spend a few days mulling over your decision before jumping into a lease agreement.”

Trust your gut: “Much like any relationship, if something feels off when you’re engaging with a prospective tenant, trust your instincts. Paperwork can be forged, but your intuition is rarely wrong,” he concludes.


Simon Dippenaar & Associates, Inc. is a Cape Town law firm of specialist eviction lawyers, now operating in Johannesburg and Durban, helping both landlords and tenants with rental property issues. Contact one of our eviction attorneys on 086 099 5146 or simon@sdlaw.co.za if you need advice on the eviction process or if you need help with any aspect of a lease or landlord-tenant relations.

Further reading:

Landlords likely to have stricter credit and rental checks after Covid-19 financial impact

By | COVID 19, Lease Agreement, Rental deposit
Rental market likely to see stricter credit checks

Landlords are advised to use their judgement and approach each situation on a case-by-case basis. (iStock)

Reprinted from Fin24, by Carin Smith – 2021-01-11

  • Most South Africans rent the property where they stay
  • Many are now also without jobs or have experienced a drastic reduction in income due to the pandemic
  • Landlords are likely to apply increasingly strict credit and rental record checks

South Africa’s rental market is likely to show only very minimal growth – if any – due to the current combination of high vacancy rates and economic pressures on tenants, according to Gerhard Kotzé, managing director of the RealNet estate agency group.

In his view, most landlords and rental agents are likely to apply increasingly strict credit and rental record checks. Deposit requirements are also likely to rise.

“A very large number of quality tenants have become home buyers in 2020 due to the lower interest rates, and on top of that landlords have had to contend with extensive non-payment issues due to the economic effects of Covid-19 pandemic and lockdown, so they are already very cautious when it come to new tenants,” says Kotzé.

“And unfortunately, a large number of those who are likely to be looking for rental properties now are people who already have some financial problems. So, there will be a need to be even more careful.”

Alternatively, says Kotzé, many rental property owners will probably just decide to sell off their portfolios now, so astute investors who have the means to buy quickly should look out for the “bargain” flats and townhouses that will come on to their local markets as a result.

Grant Smee of Only Realty says even in the best circumstances, securing reliable tenants is tricky, but the pandemic has added an extra layer of complexity into the mix.

He says data shows most South Africans rent rather than own the property where they stay. Many are now without jobs or have experienced a drastic reduction in income, leaving them suddenly unable to afford rent.

“This shift gives rise to a situation in which tenants hold more power than before and has led to an increase in short-term rental agreements being signed. In addition, tenants are calling the shots in terms of deposit amounts and various other conditions which leave landlords feeling vulnerable,” says Smee.

Recent statistics from the Tenant Profile Network (TPN) indicate that 60.74% of tenants paid their rent on time during the last quarter of 2020, while 9% of all tenants are not paying rent at all. “Long-term rentals provide financial security for landlords, and in the past agreements were generally set up to protect the interests of both parties equally.

However, today, tenants may have more say in compromises when it comes to issues such as deposit payments too.

“In a market with excess rental stock, landlords may be more amenable to reduced deposits and short-term rentals in order to stand out from the crowd,” says Smee.

“Landlords looking to take advantage of the demand for the short-term letting market, need to ensure their property provides excellent value and a unique offering. Here factors such as location, price, quality and overall experience can ensure that they stand out from other competing units.”

Challenges for Landlords

Smee says landlords were largely unprepared for tenants being unable to pay during lockdown, leaving many of them without access to an open line of credit. Very few landlords have rent default insurance and payment holidays are now up.

“While tenants are certainly more able to demand compromise, and landlords are beholden to new pressures such as short-term rental agreements, it’s unlikely that tenants will be able to ‘strongarm’ landlords into drastically one-sided agreements,” says Smee.

Landlords are still considered to hold most of the negotiating power and retain the ability to write terms and conditions into leases which are favourable to them. On the other hand, landlords feeling the pressure to retain good tenants or adjust to the difficult current market may see fit to compromise and offer lower deposits and short-term rental agreements to remain competitive.”

Smee suggests that the current situation in the rental market requires agreeing on a middle ground, where both parties consider the other’s circumstances. This could include tenants paying an available rent, and landlords being more flexible by offering short-term rentals, deposit utilisation or rental deferment.  Landlords are advised to use their judgement and approach each situation on a case-by-case basis.

Links added by SD Law

Do you have questions about your lease agreement or rental deposit?

Whether you are tenant or landlord, if you have questions or concerns about your existing lease agreement or security deposit, contact Cape Town law firm SD Law for a confidential discussion. We will explain your rights and responsibilities to ensure a worry-free tenancy. Contact Simon now on 086 099 5146 or email him on info@sdlaw.co.za.

Further reading:

What’s covered by the rental deposit

By | Lease Agreement, Rent, Rental deposit, Rental Housing Act

This article, from the Personal Finance section of Independent Online, is a clear and helpful explanation of the purpose of the rental security deposit.

rental deposit
File Image: IOL

Reprinted from iol.co.za – 2020-10-06

Following a period of lockdown restrictions that put severe pressure on the income levels of many households, some landlords have had to go through the costly process of applying for a court order to evict defaulting tenants. Adrian Goslett, regional director and chief executive officer of RE/MAX of Southern Africa, explains that the rental deposit exists largely to protect the landlord against defaulting tenants and the lengthy, expensive process that is involved to evict them.

According to Goslett, tenants are protected by the Prevention of Illegal Eviction from Unlawful Occupation of Land Act, No. 19 of 1998, also known as the PIE Act. If the correct procedures are followed, it can take at least eight to 10 weeks for an eviction order to be granted during which time the landlord is out of pocket. “Besides the fact that the landlord is not getting a rental income from the defaulting tenant during that period, they will also have to pay legal costs. An unopposed eviction could cost between R12 000 and R20 000 in legal costs plus disbursements, while the cost of an opposed matter will be substantially more. Section 5 of the Rental Housing Act, No. 50 of 1999 states that a landlord is legally entitled to request a deposit from their tenants. This deposit can be used to help cover these legal costs,” he explains.

With this in mind, most landlords request a deposit from their tenants before they move into the property. The amount that the tenant will be required to pay as a deposit is stipulated in the lease agreement. Conventionally, the rental deposit amount is equal to anywhere from one to even three months’ rent.

“When a tenant pays the deposit, the landlord is required by the Rental Housing Act to place the money in an interest-bearing account, held with a financial institution. The tenant is within their rights to request a statement of the interest earned on the money at any time during their tenancy. Even though the deposit is paid to the landlord, it remains the tenant’s money. The landlord is merely holding the money as a security measure, should the tenant default or breach the rental agreement. If the tenancy runs its normal course, the deposit along with all interest earned on the money must be paid over to the tenant at the end of the lease agreement period,” says Goslett.

However, he warns that the landlord is entitled to deduct from the rental deposit any expenses incurred repairing any damage to the property which occurred during the tenancy. “The remainder of the money must then be refunded to the tenant no later than 14 days after the restoration of the property as dictated by the Act. If repairs are done, the tenant can request to see all repair receipts to confirm that the money was spent to repair the damage they did to the property. The landlord cannot use the deposit for general maintenance or upkeep of the property. If there is no damage to the property, the full deposit and interest must be paid to the tenant within seven days of the lease’s expiration date,” he explains.

Should any disputes arise between the landlord and the tenant regarding the rental deposit, Goslett recommends they can turn to the province’s Rental Housing Tribunal. “The tribunal assists to mediate and resolve disputes between the parties. Before entering into a rental agreement, both the tenant and the landlord should familiarise themselves with their legal rights regarding the tenancy and the rental deposit. Knowledge of the relevant procedures can help prevent unpleasant and costly disputes down the line,” he said.

Links added by SD Law.

Do you have questions about your lease agreement or rental deposit?

Whether you are tenant or landlord, if you have questions or concerns about your existing lease agreement or security deposit, contact Eviction Lawyers for a confidential discussion. We will explain your rights and responsibilities to ensure a worry-free tenancy. Contact Cape Town lawyer Simon Dippenaar now on 086 099 5146 or email him on info@sdlaw.co.za.

Further reading: