Security Deposits – Where Does It Go?

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One of the first roadblocks prospective tenants face when looking for property to rent is the security deposit. The purpose of a security deposit is to protect the landlord against any possible damage the...
South Africa Real Estate and Construction

One of the first roadblocks prospective tenants face when looking for property to rent is the security deposit. The purpose of a security deposit is to protect the landlord against any possible damage the tenant might cause or to cover the costs should any other unforeseeable event occur.

Section 5 (3) of the Rental Housing Act 50 of 1999 requires that the landlord invest a deposit into an interest-bearing account, which is for the tenant's benefit. However, many tenants are unaware of this requirement by the Act, and many landlords use this as an advantage by not refunding a tenant the interest earned on the deposit paid. Landlords are known to not include this provision in a lease agreement, and if a tenant does not read through the lease agreement thoroughly, this causes them to be unaware of it.

Additionally, a tenant has the right to request the landlord to provide written proof of the interest accrued, and the landlord must provide such evidence, provided that where the landlord is or has a registered estate agent in terms of the Estate Agency Affairs Act 112 of 1976, the deposit and any interest shall be dealt with under the Act.

On the expiry or termination of a lease, the tenant is entitled to a refund on the deposit initially paid by the tenant. The deposit and interest accrued must be refunded to the tenant within seven days of the expiration of the lease agreement. Should there be any property damage, the landlord can use the deposit plus the interest accrued towards the cost of repairs for any damages.

Security deposits play a beneficial role for both the landlord and the tenant. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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