Assessment & Traning Centre

October 2010

Dear Rental Readers

The management mandate detailing the remuneration due between the owner of a residential property that must be leased and a rental agent (agency) is based on the payment of commission by the owner to the rental agent. In the case of a 'finder's fee' the commission is paid as soon as the mandate has been fulfilled where after the agent may present their commission statement.

The amount of commission payable is dependant on the length of the lease period and for short term leases is usually equal to one month's rental. The agent either hands over the full deposit to the landlord who has been instructed that the Rental Housing Act's requirements are that the deposit is placed in an interest bearing account with a bank, the interest to go to the tenant.

Payment of VAT on commission

In cases where the rental agency is a VAT vendor the commission plus VAT needs to be paid and often the agency deducts the VAT from the tenant's deposit because the first month's rent does not cover their fee.

This is not permitted.

The agency is expected to invoice the landlord for the amount owed irrespective of commission or include the VAT amount in the commission. The tenant's deposit cannot be used because it is a damages deposit only to for consideration upon the termination of a lease. It is not the responsibility of the tenant to pay VAT as this tax is on commission which is the responsibility of the landlord.

Should a tenant terminate a lease agreement before the termination date for any reason, it is common practice that the tenant is often charged by the rental agent for the outstanding commission until the end of the lease. This is generally not provided for in the lease agreement. When the property is relet there is seldom a refund of the commission paid to the tenant. It is important to be aware that undue enrichment is illegal and a rental agent cannot accept rent or commission twice. A tenant can approach the courts or the Tribunal for a definite refund in this regard.

The Rental Housing Tribunal recommends that there should be a cancellation clause in a lease, stated in money, and that the fee should cover loss of commission and advertising costs. It is expected that a landlord or his agent must be proactive about finding a new tenant to mitigate future losses and not to sit back and expect the tenant to pay every month when the tenant may have a legitimate reason for needing to move.

Sectional Title: Landlord, Tenant and Body Corporate

Sectional title complexes have house rules that govern the relationship of all residents in a sectional title complex. These control, administer and manage the common areas.

A tenant is under a legal obligation to observe these rules bearing in mind that a rule can be enforced with a penalty if the majority of owners have voted in favour of it. The penalty or fine is part of the rule but the enforcement thereof relates to the control and administration of the common areas.

It is the duty of each rental agent to see that a copy of the house rules is attached to the agreement of lease so that the tenant is aware of what is expected in the complex.

Often bodies corporate expect to interview a prospective tenant to screen them and decide whether the person would be allowed to occupy a unit. This is not permitted because House Rules do not have the power of enforcing such an action. Any Conduct and Management Rule made has to be lodged in the Deeds Office before it can be enforced and it has already been indicated by the chief registrar of the deeds office that such a rule would not be acceptable in terms of the Constitution of the country.

If it is demanded of you as rental agents to subject your tenant to this type of interview ask the trustees under what authority they claim to have the right to interview a prospective tenant. It is a serious enough act to warrant a High Court application should trustees make it difficult for a tenant to either move into or live in a unit without screening.

When it comes to visitors of a tenant in a sectional title complex, the trustees cannot restrict visitors not impose a time restriction on them. All that is expected is that the visitors behave in a manner that does not constitute a nuisance.

Consumer Protection Act

This act comes into being on 25 October 2010 and if it remains in its present form it will change the face of rentals completely. The Rental Housing Tribunal is studying the clauses of the act carefully and will make recommendations closer to the time. There are seminars on how it may affect residential rentals and it is suggested that you attend these to increase your knowledge

Vivien & Debbie