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Ignore at your peril: Four new legal requirements you have to apply when leasing your property

by , 03 November 2014

The rental housing amendment bill has been tabled in front of the national assembly and passed. Now all that's needed is the passing of a resolution and for the president to sign it.

And as soon as that happens you, as a landlord, will have six months to comply with the bill or you could be held criminally liable according to the act - with up to two years jail time!

That's why you need to make sure you know the contents of this bill, adjust your rental contracts accordingly, and act accordingly. If you don't the consequences are huge.

Four new legal requirements you should start applying TODAY

Legal requirement # 1 – Whether the act is signed into law or not you MUST do this

The very first big requirement of the new act is that it now becomes a requirement for a written rental contract.

Fortunately I don’t see this as an onerous addition to the act, it’s crucial. A written rental agreement protects you, the landlord, just as much as it protects the tenant.

In fact, I’ve seen very bad ‘squatting’ situations arise for landlords where all agreements are verbal – it becomes impossible to prove exactly what your agreement was, what rent is payable and by when.

Tip: If you own a sectional title unit, or one within a homeowners association I’d advise you add in the conduct rules as an annexure to the rental agreement. Ensure your tenant reads and signs these rules so that they are aware of the need to abide by the rules. This is the only way you can pass on fines imposed by the body corporate if the tenant misbehaves.

Legal requirement #2 – When it comes to squabbles about rent this could really help you

The act determines that you have to give a detailed receipt to your tenant when you receive any payment, be it a deposit, monthly rent or towards water and electricity charges.

While it might sound like extra work that you have to give a detailed receipt to your tenant upon receiving a deposit or monthly rental payment it really isn’t.

You see, I’ve been in a situation where the tenant disputed the payments they’ve made towards rent – and the onus of proof lies with the landlord.

So if you have a clear set of signed receipts, numbered sequentially it’s very easy to prove which payments were made and which ones weren’t.

Tip: The receipt must contain the following: Address of the leased premises, payment details, rental payment balance, period for which payment was made.

Legal requirement #3 – Make sure you do this if you don’t use a letting agent

The act requires you to save the rental deposit in an interest bearing account. While most letting agents have been doing this for years many landlords don’t.

So – the moment you receive the rental deposit from your tenant you should open a 32 day fixed deposit and deposit the money into that.

Just remember to put in notice before the end of the tenant’s term in order to free up the cash.

Provided there are no outstanding monies owed to the landlord upon the expiration of the lease, the deposit without deduction, along with any interest accrued will be paid back to the tenant within a seven-day period.
In the instance where the tenant has caused damage to the property or lost keys, the landlord may deduct the necessary reasonable costs from the deposit before it is paid over to the tenant.

Legal requirement #4 – your last responsibility to your tenant could be the most important

Inspection at the end of the lease period to check for damage is a requirement of the new act.

On termination of the lease it is the landlord that must arrange for a joint inspection. It is no longer a joint responsibility, as is the position in the current Act.

It is very important you do this inspection. Give your tenant seven days written notice that you’ll do the inspection and inform them they should be present. However, add in a clause that the inspection will be done regardless of whether they are present or not – albeit to their detriment if they don’t pitch.

Go through the property, looking for damage. Hold the tenant accountable and give them a written assessment of the damage afterwards as well as a detailed receipt showing deductions from the rental deposit due to damages.

Ensure you’re on the right side of the law – and it could help your rentals in the future

While many see these legal changes as red tape making the life difficult for landlords I don’t.

The fact is – the rental income you receive is ‘business income’. And you need to run your ‘rentals business’ just as professionally as you would any other business.

Regardless, as I’ve shown you, application of these legal changes in the right way will actually improve your relationship with your tenant and it could save you massive legal issues in the future.

So make sure you’re on the right side of this coming law – but don’t wait for it to come into working. Apply these requirements as best practices in your business today.

Ignore at your peril: Four new legal requirements you have to apply when leasing your property
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