The importance of knowing the laws that govern rental properties
Becoming a landlord can be an exciting prospect and is potentially a sound investment. However, like all other investments, it is not without its risks and any potential landlord should do his/her homework carefully before forging ahead. Knowledge is powerful and can really help avoid those pitfalls that could upset that property venture.
So, where to start? It is a good idea to become familiar with as many as possible of the laws that govern rentals because it is important to understand that legislation will always trump agreement. This means that you can place anything you like in a lease agreement and have both your tenant and you sign it and agree, only to find that when one of you changes your mind and challenges any one of the agreed upon terms, that there are serious ramifications if the lease is not strictly within the bounds of our legislation.
Alternatively, a good managing agent will be able to guide you through the ups and downs and ensure that you have the best lease in place with the best back up.
So, what are the basics that you need to know before you sign up a Tenant? Listed below are just some of the legislations that residential leases are subject to.
Rental Housing Act
All residential leases in South Africa are governed by the Rental Housing Act, 50 of 1999 and the Amended Rental Housing Act, 35 of 2014. It governs the relationship between the landlord and the tenant and applies to all written and verbal agreements made, effective August 1, 2000. It sets out what should be contained in a lease agreement and provides information on the cancellation or termination of a lease.
It also encompasses the Rental Housing Tribunal which was set up to mediate between tenants and landlords where a dispute arises. Rental Housing Tribunals are run in the same way as a Labour Court and their rulings have the same power as those given in a magistrate´s court. If any party is not satisfied with the proceedings of the tribunal, they may take the case to the High Court.
The latest Rental Housing Amendment Act places more stringent obligations on landlords which, if they fail to meet these obligations, can result in a criminal offence. These include providing your tenant with a written lease agreement, ensuring the property is fit, habitable and maintained. It also includes a ruling that the landlord may not cut utilities to the dwelling, nor may they lock the tenant out of the premises.
In a nutshell:
- The landlord has a right to have his rent, and any other payments due under the lease agreement, paid on time and in full.
- The landlord may obtain possession of his property back after obtaining a Court Order.
- The tenant has a right to privacy which means the Landlord may only enter the premises after reasonable notice has been given to the tenant.
- The landlord may not seize the tenant’s possessions unless he obtains a Court Order.
- The landlord may not discriminate in any way against a tenant (or prospective tenant) based on race, gender, sex, pregnancy, marital status, sexual orientation, ethnic or social origin, age, disability, religion, conscience, belief, culture, language or birth.
- The landlord may not do, or have done, anything that would constitute an unfair practice.
- The landlord may (and should) charge a damage deposit which must then be placed in an interest-bearing account, the interest being for the tenant’s account.
- The landlord and tenant must jointly inspect the property before (or on the day) the tenant takes occupation in order to ascertain the condition of the property. This list of defects must then be annexed to the lease agreement. The list of defects should clearly state if the landlord is responsible to rectify. If it is not deemed to be a “fit for purpose” defect, then it is merely there as a record of its existence so that the tenant does not have to rectify or pay for it to be rectified at the end of the tenancy.
- A joint inspection must be carried out at the end of the tenancy to ascertain what, if any, damages were caused during the tenancy. This should be done within 3 days prior to the tenant vacating. If the tenant fails to agree to an inspection, the landlord must inspect the property within 7 days of the tenant vacating.
- The landlord may use the deposit (plus any interest earned) to offset any payments for which the tenant is liable under the lease.
- The landlord must refund any balance of the deposit, plus interest, to the tenant not later than 14 days after restoration of the property. It is a common misconception that the deposit must be refunded after 14 days but this is incorrect – it is 14 days after restoration of any damages.
- If there are no damages to be dealt with and no other outstanding payments due, the deposit plus interest must be refunded within 7 days of the expiry of the lease.
Consumer Protection Act (CPA)
The Section 14 of the CPA has a big impact on lease agreements and the rights of both the landlord and the tenant. Whilst Section 14 is the most impactful, there are further sections that also relate to lease agreements. For example, Section 4, Section 48, Section 49 and Section 51 are all also relevant.
Firstly, it is very important to know when a lease falls under the CPA and when it does not.
The CPA will not apply in the following circumstances:
1. The lease is a juristic lease ie:
– Where both the Landlord and the Tenant are juristic entities (such as a Company, Close Corporation, Trust or Parnership).
– Where the tenant which is a juristic entity with an annual turnover or asset value which equals or exceeds R2 million.
2. The lease is a month-to-month lease.
Section 14 deals with the end of the lease term with regards to how it is renewed and how it is terminated as well as the length of the term of the lease.
Basically, it gives the tenant the right to cancel the lease by giving 20 business days’ notice. However, the landlord is then entitled to charge a reasonable penalty which should not exceed the value of the remaining rental due under the fixed term of the lease. It should be calculated on the cost to the landlord from the loss of the tenant. For example, any commission paid that was calculated over the full term, advertising costs and rental void costs up to a maximum of two to three months but only if that is shorter than the original termination date of the lease.
When it comes to renewals, Section 14 puts the onus on the landlord to approach the tenant at least 40 business days (but no more than 80 business days) prior to the expiry of the fixed term of the lease to establish whether they wish to remain in the property and to advise any amendments to the lease This includes any rental increase, that will come into effect upon the expiry of the fixed term. It is then the tenant’s responsibility to respond and either accept the new terms or give notice of their intention to vacate at the end of the fixed term. Should the tenant not respond, then it is deemed that the tenant will stay on in the property on a month-to-month lease but under the new terms and conditions as set out in the original communication from the landlord. The lease will then no longer be subject to the conditions of Section 14 of the CPA and any notice from either side must be one calendar months written notice. It is worth noting that if contact is not made by the landlord (or his representative) in the time frame mentioned above, then the tenant is free to leave the property on the last day of the fixed term without giving any notice. However, if the tenant stays just one day over, then the lease becomes a month-to-month and the tenant is obliged to give a calendar months’ notice.
Protection of Illegal Eviction Act (PIE)
The PIE act is described as “To provide for the prohibition of unlawful eviction; to provide for procedures for the eviction of unlawful occupiers; and to repeal the Prevention of Illegal Squatting Act, 1951, and other obsolete laws; and to provide for matters incidental thereto”
Unfortunately, the PIE act makes it very difficult to evict a non-paying tenant who does not want to leave and knows his rights under the law. The Act sets out a very lengthy process for landlords to follow and for the final eviction, a court order is required. This process can take up to six months if the legal process is properly followed right from the start, longer if errors have been made in the process.
The best way to deal with this is to ensure that you get a good, qualified Tenant from the start so that this process should not be necessary.
These are just three of the many different legislative acts that govern lease agreements. As a landlord you should be aware of what is required and what is contrary to law when renting your property. To ensure that everything is done correctly upfront and any issues that arise during the term of the lease are dealt with correctly, you should seek professional advice. At Wakefields Property Management, we pride ourselves on our expertise as well as professionally drawn, tried and tested Lease Agreements, to ensure your property is correctly managed under all circumstances.