- Need for correct bookkeeping
- Lack of adequate oversight
- Missing deposits
- Unregistered rental agencies
Many tenants are often misinformed when it comes to their deposits when they first sign a lease contract.
First of all, the contract itself should specify when the deposit will be returned and under which circumstances the deposit will be withheld. Besides that, there are other grey areas that aren’t properly explained to tenants and landlords regarding the safety of their deposits.
It is easy to just give an account number and expect the tenant to pay the deposit in, but how many tenants actually know where the deposit is going?
Here are a few things to keep in mind:
Need for correct bookkeeping
Firstly, both the landlord and the tenant should ensure that rental deposits are being paid into the correct account.
These accounts should be properly audited trust accounts that are set up when the lease has been signed.
This is a strict warning that comes from several cases of “missing” deposits that were reported in the Gauteng area.
In certain areas, the demand in the rental market is very high, making it easy for unethical operators to pose as rental management agents. These ‘agents’ are not registered with the Estate Agency Affairs Board, thus they do not have valid Fidelity Fund Certificates.
Lack of adequate oversight
Such operators regularly pay the deposits they receive into their personal accounts without anyone overseeing it.
Unfortunately, at the end of the rental agreement, tenants find themselves out of pocket at the end of their rental contracts with the deposit they have paid gone ‘missing’.
Legally, consumers do have legal recourse to recover their money, but this is a long and drawn-out process. Depending on the length, it can also become quite expensive, maybe even surpassing the deposit amount that has been lost.
In the end, many tenants feel like it’s not even worth fighting in court.
This does not mean that tenants are completely giving up hope. There have been reported numerous cases of deposits gone missing. Desperate tenants and landlords approach authorities on a weekly basis for advice after discovering that the deposits disappeared.
Another case that is rearing its ugly head is agents who were supposedly in charge of managing the property not being able to account for the deposit or even worse: having completely absconded.
These types of situations put the landlord and the tenant in very difficult positions.
On the one hand, tenants usually depend on receiving their deposits after they have completed their lease agreement and if they have adhered to all the details stipulated in the contract. Plus, the accumulated interest on the deposit could also help a long ways for the next deposit on a new unit that they are going to rent.
On the other hand, if a property has been damaged, the landlord cannot retrieve the cost of the damage from the deposit that has been paid. The ‘missing’ deposit leads to landlords having to pay for the damages out of their own pocket.
A ‘missing’ deposit leaves everyone in financial woe at the end of the day.
Unregistered rental agencies
In a recent survey, statistics revealed that more than half of agencies currently offering rental property management services in Sandton are not registered with the Estate Agency Affairs Board. Unregistered agents are more likely to have unaudited accounts.
Consumers need to ensure that their rental agent is in possession of a valid and current Fidelity Fund Certificate and that their deposits are paid into a properly managed account.
Dealing with franchisees and agents of an established real estate group will also give tenants a higher sense of security and peace of mind. They will ensure that their tenants and the landlord’s interests are protected at all times.