As a property professional, managing damage deposits effectively is key to maintaining a healthy rental portfolio. Damage deposits are a requirement for almost all tenants, and they serve to protect landlords against damage that may be caused by the tenant.
Damage deposits are managed by rental agents on behalf of landlords, but legally the money belongs to the tenant, creating strict legal obligations for rental agents. Agents are required to invest the deposit in an interest-bearing account with a financial institution, and at the end of the rental term, any interest so earned must be paid to the tenant after deductions for damage or rent arrears.
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André van Rooyen, Head of Sales at PayProp, offers five tips to help rental agents manage damage deposits efficiently, protecting the best interests of both tenants and landlords:
Take stock
It’s important to do a monthly check in on your damage deposit book to ensure that all active tenants have deposits in place, and that deposits are returned promptly when tenants vacate.
Top up deposits at lease renewal
If a lease is renewed and the rental amount increases, it's important to also adjust the damage deposit. Many professionals overlook this detail, but keeping deposits proportionate to rental increases ensures that rising maintenance costs will still be covered.
Be transparent with tenants and owners
The deposit belongs to the tenant but is managed for the owner’s protection, so both tenant and owner should have easy access to information about it. Tenants should be able to see their balance, including any interest earned, while owners need access to the details of all payments due and disbursed in regard to the property. Transparency fosters trust and keeps everyone informed, reducing the chance of disputes later.
Know the law
There are many laws and regulations that govern damage deposits in South Africa. This includes knowing the timing of inspections, who should be present while they’re conducted, the evidence needed to make a damage deduction, and how to communicate with tenants. These laws can be complex, but understanding them is essential for staying compliant and avoiding costly mistakes.
Ensure safety and security
The management of damage deposits should be secure, with clear permission protocols in place to manage any payments. No single person should be able to pay funds out of a deposit without oversight. Implementing a system of checks and balances will help prevent errors or fraud, giving both tenants and property owners peace of mind.
Building a strong, saleable asset
Van Rooyen adds that a well-managed rental book is a saleable asset. “A key indicator of health in a rental portfolio is the way in which damage deposits are handled. PayProp offers tools that help property professionals to follow these practices, equipping you to handle damage deposits effectively, make sure you comply with the law, and look after the tenant and landlord’s best interests while also increasing the value of your business,” says van Rooyen.
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Although “fair wear and tear” is acceptable, any additional damage could put the deposit at risk, according to PG van der Linde, rental manager for Seeff Pretoria East.
Here is a look back at van der Linde's tips with regard to Safeguard your deposit, leave your rental in a clean state.
"Aside from any potential rental arrears, the landlord can also deduct the cost of repairs. If there are maintenance issues during the lease period, the tenants must raise this with the landlord. They cannot wait until the lease expires".
It is a legal requirement that a condition of property report be done when the tenant takes occupation. This document should record the full state of the property and highlight any defects and must be signed by both parties. The document then forms the basis for an outgoing inspection to identify things that need to be fixed or cleaned.
Seeff says tenants must ensure the property is cleaned and restored by the last day of their lease, and at least by the latest at midday on the day when the new lease expires. It is therefore advisable to start preparing at least a week before you move out.
The entire property must be thoroughly cleaned. That includes the walls, light fittings, cupboards (inside and outside), kitchen including the stove and oven, appliances and cabinets. Remove anything that you affixed to the walls, plug the holes and paint where necessary. Walls which do not require painting should be washed.
READ: Safeguard your deposit, leave your rental in a clean state
Windows must be cleaned. If there are blinds, these must be in full working order and cleaned. Curtains, if any, must be dry cleaned. Floors must be steam cleaned, including any carpeted areas.
Any broken or loose cupboard hinges and handles should be repaired or replaced. All electrical appliances, plugs and lights must be in a full working order. All the lightbulbs must be working. Any dripping taps should be fixed. There should be no blocked drains.
If the property is furnished, all furniture should also be cleaned, and mattresses and couches steam cleaned. The swimming pool, if there is one, should be clean and in full working order, including the pump and creepy. If you kept pets, any pet smells must be cleared out and anything dirtied or damaged must be repaired.
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Garages should also be cleared and cleaned. The garden should be trimmed and tidy. All refuse should be removed so that a clean bin is left for the new tenant.
A final inspection must be done and signed by both parties. A full set of keys and remotes must be handed over when you vacate the property.
If there are any repairs that need to be done, the landlord must provide proof of these. The deposit (net of any repair costs) must be refunded to the tenant within 14 days. Disputes can be lodged with the Rental Housing Tribunal.
READ: Landlords: A guide to finding the ideal rental candidates
Additional information:
The Rental Housing Tribunal has the authority to deal with disputes, complaints or problems between tenants and landlords in the rental housing dwellings:
Any practice unreasonably prejudicing the rights or interests of a tenant or a landowner - It may, amongst other things relate to:
- Illegal lockouts or illegal disconnection of services (water, electricity etc.)
- Failure to refund a deposit
- Damage to property
- Demolitions and conversions
- Illegal evictions (The Tribunal does not have jurisdiction to hear applications for
- eviction orders)
- Forced entry
- Non-compliance with house rules
- Harassment and intimidation
- Failure to issue receipts
- Unlawful seizure of tenants’ goods
- Prohibiting the establishment of tenants’ committee and tenants’ activities
- Termination of Municipal services
- Causing a nuisance
- Overcrowding and causing health hazards
- Exploitative rentals and determination of fair rentals
- Lack of maintenance and repairs
- Non-payment of rent
- Discrimination by landlord against prospective tenants
In terms of section 13(13) of the Rental Housing Act 50 of 1999, a ruling of the Tribunal is deemed to be an order of a Magistrate's Court in terms of the Magistrate's Court Act, 1994.
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