Rent deposit problem.

[marco]

I rent a shop from a large parastatal company. Recently I reread my contract and noticed a clause saying that the interest on my deposit will be regarded as admin fees.
As far as I know, the deposit must be in an interest bearing account and paid to you on termination.
Can they do this? I have searched the web for info but can't find anything.
Thanks
Marco

[Dave A]

I've been hoping someone who might be up on the current state of affairs on this might reply.

Best I know, who gets the benefit of the interest is determined by the contract - unless there has been a fairly recent amendment to regulations that have changed the situation.

Many lease agreements drawn up by letting agents have the interest accruing to the benefit of the tenant, but I'm not sure there is any legal requirement for it to be this way.

[QUINN]

The deposit has to be held in an interest bearing account.
If the terms of the contract does not state this, the the interest has to be paid to the Estate Agents Affairs Board.
The landlord being a government department does not change the rules.

[Dave A]

Just to clarify (pardon me being a bit dense here, please).

The deposit has to be held in an interest bearing account.

OK. This makes perfect sense. No problems so far.

But who may get the benefit of the interest? I've seen contracts where:

• The interest accrues to the tenant, and are supposed to get it when they move on along with the deposit refund.
• The administering agent gets the interest as part of their administration fee.
• The landlord gets the interest.

Also, what (if any) legislation determines this?

That bit about the Estate Agents Affairs Board getting the interest is ... erm... interesting. I've never seen that one in a lease/rental agreement.

[QUINN]

Hi Dave hope you had a restful holiday,

The arrangement where the board gets the interest just comes into effect when no arrangement is made as to what should happen with it.

Normally the deposit is held in TRUST for the tenant, I have never seen any arrangements where the landlord keeps the interest........specially in commercial leases I can not understand why any tenant would agree to pay the deposit to the landlord

[Sieg]

Interest on deposit

I disagree with the two views previously expressed:

1. The Rental Housing Act 50 of 1999 only obliges landlords of a "dwelling" as defined in the Act, to pay interest on a deposit to the tenant upon termination of the lease (Section 5(3)(d). There is no similar obligation in respect of a lease for commercial or industrial premises so the landlord in this case (commercial lease) does not have to pay any interest on the deposit if the lease agreement does not say so;

2. It is only in the case of money held in trust by an Estate Agent (in terms of the Estate Agency Affairs Act) that the estate agency is obliged to pay one half of the interest earned on the estate agency's trust account, to the Estate Agency Affairs Board. The parastatal landlord in this case, has no such statutory obligation.

Sieg

[Dave A]

Thanks for clearing that up, Sieg.

[QUINN]

Never to old to learn......Thanks

[Karenwhe]

Just one more small thing to add, facility managers in commercial the likes are also not obligated to be registered with the EAAB. I heard that this may change, the DTI also wants to add builders to the list of practitioners who have to comply with estate agents act, but that remains to be seen.

Sieg is right only residential tenants are protected under the rental housing act, everything else is ruled by pure business capitalism and good negotiation skills.

[Karenwhe]

One more thing that I remembered, you can negotiate in commercial that the deposit will be a letter of guarantee from the bank. In cases of large amounts and many years leases the sums add up and in this way the tenant may keep his money in a interest account locked away for that period while giving the landlord a guarantee for the required amount. This is acceptable but does require negotiation skills.