Can a Landlord Withhold a Deposit for Outstanding Rent?

The landlord-tenant relationships include balancing the rights of both parties. Key provisions in the Rental Housing Act 50 of 1999 and the Consumer Protection Act 68 of 2008 (CPA) address whether a landlord can withhold a tenant’s deposit to cover outstanding rent or other liabilities upon the termination of a lease.

To answer this question it is important to understand two vital pieces of legislation. Namely, section 5(3)(g) of the Rental Housing Act and section 14 of the CPA.

If you’re looking for a lease agreement that aligns with the CPA, The Rental Housing Act, and the PIE Act, inclusive of all vital clauses, download your own professionally drafted lease agreement here.

The Deposit - Section 5(3)(g) of the Rental Housing Act

Section 5(3)(g) of the Rental Housing Act explicitly provides that:

On the expiration of the lease, the landlord may apply the deposit and interest towards the payment of all amounts for which the tenant is liable under the lease, including the reasonable cost of repairing damage to the property, replacing lost keys, and other liabilities. Any balance must be refunded to the tenant within 14 days of the tenant restoring the property to the landlord.

This provision underscores several key principles:

• Purpose of the Deposit: The deposit serves as security for the landlord, enabling them to recover costs arising from:
  • Outstanding rental payments;
  • Damages beyond reasonable wear and tear; and
  • Other contractual liabilities, such as lost keys.
• Interest on Deposits: The landlord must invest the deposit in an interest-bearing account and disclose the applicable interest rate to the tenant. Upon lease termination, the deposit and interest must first be applied to the tenant’s outstanding liabilities before any balance is refunded.
• Timely Refunds: If no deductions are required, the full deposit and accrued interest must be refunded within seven days of lease termination. If deductions apply, the refund must be processed within 14 days after finalizing repairs or other costs.

Deposit - Termination of a Lease Agreement under the CPA

The CPA governs fixed-term consumer agreements, such as lease agreements, to protect tenants as consumers. Section 14 is particularly relevant when considering lease cancellations.

Section 14(2)(b): Cancellation by the Landlord

A landlord (as a "supplier" under the CPA) may cancel a lease agreement if the tenant materially breaches the agreement, such as by failing to pay rent.

The process requires written notice of at least 20 business days to the tenant, detailing the breach, and termination if the tenant fails to rectify the breach within the notice period.

This ensures the tenant has a fair opportunity to remedy their default before eviction proceedings or other enforcement measures commence.

Section 14(3)(a): Liability for Outstanding Amounts

If the tenant’s deposit covers these amounts, the landlord may apply the deposit to settle the debt.

Practical Application: Withholding Deposits for Rent

In South African, landlords are permitted to withhold part or all of the deposit for outstanding rent, provided this is done in accordance with the lease agreement and the Rental Housing Act. A summary of key considerations includes:

Contractual Terms: The lease agreement governs the tenant’s liabilities. Landlords must ensure that provisions align with statutory requirements, including the obligation to refund any unused portion of the deposit.

Documentation: Landlords should provide an itemized breakdown of deductions, supported by invoices or other evidence, to avoid disputes.

CPA Protections: Landlords must adhere to the CPA’s procedural requirements when terminating the lease, particularly regarding notice periods and the tenant’s right to rectify breaches.

Refund Timelines: Even when deductions are made, the landlord must refund any surplus deposit within 14 days after finalizing the property inspection and related calculations.

Download Your Own Lease Agreement

If you’re looking for a lease agreement that aligns with the CPA, The Rental Housing Act, and the PIE Act, inclusive of all vital clauses, download your own professionally drafted lease agreement here.

Conclusion

Section 5(3)(g) of Rental Housing Act empowers landlords to use the deposit for valid claims, including outstanding rent, but only after fulfilling statutory obligations. Similarly, section 14 of the CPA provides mechanisms to address breaches while ensuring procedural fairness.

Landlords should adopt transparent practices, keeping thorough records and adhering to refund timelines to avoid disputes. Tenants, on the other hand, are advised to maintain the property and fulfill their rental obligations to minimize deductions.