A recent ruling by the Rental Housing Tribunal has highlighted the need for clear and well-drafted lease agreements following a dispute between a tenant and landlord after a tenant terminated a lease agreement early. The Tribunal agreed with the landlord’s agency, TPN, that reasonable penalty could be charged and that some of the deposit money could be held back for maintenance issues related to the property. TPN is a credit bureau that specialises in rental properties.
The Tribunal had to decide “whether a rental agent is entitled to retain a portion of the deposit as a reasonable penalty on behalf of the landlord” when a tenant cancels their contract early, without giving the required notice.
In particular issues around who is responsible for the rental agent’s commission (either the tenant or the landlord) came to the forefront.
TPN noted: “The dispute centred [on] the failure to refund a deposit as the result of early termination of the lease agreement by the tenant, as is required in terms of section 5(3) of the Rental Housing Act. Specifically, there was a disagreement between the tenant and the landlord regarding who was liable for the estate agent’s commission.”
The Tribunal found that the rental agent involved in the incident could retain R8 500 from the tenant’s initial deposit of R42 450, “over and above the costs the tenants agreed to have deducted from the deposit for maintenance issues relating to the property.”
Leases and the law
Section 5 of the Rental Housing Amendment Act 43 of 2007 deals with “provisions pertaining to leases”.
According to Section 5(1) of the Act, a lease agreement does not have to be in writing, however, a landlord must present a written lease agreement if the tenant requests it.
If a tenant vacates a residence before the termination date of the lease, and without notice to the landlord, “the landlord retains all his or her rights arising from the tenant’s breach of the lease.”
According to TPN, the ruling by the Rental Housing Tribunal has helped to clarify the application Section 14 of the Consumer Protection Act (CPA) to lease agreements. This section of the CPA deals with the expiry and renewal of fixed-term agreements, and therefore relates to Section 5 of the Rental Housing Act.
TPN noted: “The ruling confirms that the CPA applies to leases - it is the first Ruling to deal with penalties and a claim for damages relating specifically to an estate agent’s pro-rata commission.”
TPN highlighted that the ruling by the Rental Housing Tribunal stresses the importance of having a quality and well-drafted lease agreement in place that “takes all relevant legislation into account,” in the event that a legal matter arises.
“TPN is confident that landlords who make use of well-drafted lease agreements such as LeasePack and who calculate the reasonable penalty on actual damages will find themselves comfortably able to argue their case,” said TPN managing director Michelle Dickens.
The Rental Housing Tribunal was established by the Rental Housing Act to settle disputes between tenants and landlords. It falls under the Department of Human Settlements, with each province having their own tribunal to deal with tenant-landlord disputes.