11 Feb 2009
When using a managing agent to look after your property it is normal for them to keep the tenant's deposit in their trust account. It is normal not to pay interest on this deposit and not to open a separate account in the bank. Some larger companies do run a special bank account that allows them to recognize individual deposits and pay interest but this is unusual. The purpose of the deposit it cover unpaid rental, damages when the tenant moves out and other expenses such as carpet cleaning, inspection fees, unpaid electricity and water accounts.
For this reason it is important that the deposit it kept up to date so that if the rental increases the deposit should be increased to keep it up to the full level required.
Don't be afraid to ask for the deposit to be greater than one month's rental. Many agencies insist on one-and-a-half or even twice the monthly rental.
It is important to show precisely how any deductions were made and to whom the money was paid. For all actual costs a receipt must be obtained. A deposit refund form should clearly set out any deductions from the deposit and have copies of the invoices for amounts deducted. The originals should be filed with the tenant's lease.
It is a requirement that where there is no damage to the let premises that the deposit should be paid back within seven days. Where there are deductions for damage it should be repaid with 14 days.
While the first is possible, it is simply not practical to repay deposits with damages within 14 days. Just to get contractors out can take longer than that and to have the work done and receive invoices can take months! Having a system that allows you to know where the repayment of a deposit is helps a great deal.
Before a deposit can be repaid it is important that you have proof that any water or electricity accounts have been settled. With municipal accounts make sure that you have the final water and electricity accounts, not just the latest, otherwise you could be surprised with an account to be settled after the deposit has been refunded.
Where water or electricity is supplied by the body corporate, it must be approached to give a similar final clearance. No final account, no deposit refund - this must be a strict rule. When accepting new tenants make sure that they can afford to pay the rental you are charging. Paying off the deposit over a period of months is a "no no". If they cannot afford to pay the deposit in one go it is quite likely that they will struggle to pay your rent. If they start battling to pay the rent and have not yet paid the full deposit you could be in real trouble.
Article published by Realesateweb.co.za