09 June 2022

Unpacking the Nitty-Gritty of tenant deposits

Submitted by Kaylin Van Der Vent
Unpacking the Nitty-Gritty of tenant deposits

One of the most contentious stages of a lease period is when the lease is terminated, and discussions around the return of the deposit begin. Paul Stevens, CEO of Just Property, offers insight into how the process is regulated, and what tenants and landlords can do to avoid disappointment, stress and anger. 

The Rental Housing Act governs how deposits and interest earned are handled. The Act states that landlords may require tenants to pay a deposit before moving into a dwelling and that such a deposit may not be greater than the deposit amount agreed between the landlord and the tenant. In other words, this amount is a point of negotiation and agreement; it may be led by market norms, the landlord’s appetite for risk, the type of property, the tenant’s credit history and other factors.

The Rental Housing Act also dictates that deposits

Must be invested by the landlord in an interest-bearing account with a financial institution. Best practice is to hold the deposit in a dedicated Trust account, independent of the business/ landlord’s operating accountThat “the interest rate applicable to such account may not be less than the rate applicable to a savings account with that financial institution” and

Tenants can request written proof of how much interest was earned on the deposit while it was in the account, and the landlord needs to show the tenant proof if requested.

The process and timelines for paying back deposits is addressed in the Rental Housing Act too. It states that deposits must be “repaid to the tenant together with any interest accrued to such account on the expiration of the lease. This can be achieved within 7 days of the end of the lease if certain conditions are met.

TENANTS, PROTECT YOURSELF FROM THE WORD ‘GO’

According to the Rental Housing Act, both the tenant and landlord/ representative property practitioner need to attend the incoming and outgoing inspections. This way, both parties will be aware of any damages that are placed on record, and if they happened before or after the tenant moved in. This evidence allows the tenant and landlord/ representative property practitioner to more easily navigate the common issue of normal wear and tear versus damage to property, whether intentional or not.

Tenants and landlords should keep copies of the inspection report and date-stamped photographs for their own record and in case other records are misplaced or damaged. These should include things like doors without keys, damp patches, missing light covers, scratches on wood floors, stained carpets, nails in walls and anything that is broken or might be an issue in the future. Tenants should make sure that things like all lights, plugs and stove plates work and should also remember to record issues with regard to the exterior too. The inspection report should include descriptions for each photograph as it can be difficult to remember details down the line.

Tenants, protect yourself by carefully reviewing the landlord’s or representing agent’s incoming inspection report and associated photographs. Insist that the records be edited if anything has been omitted or misrepresented. Careful attention here will help to avoid future disputes. When it’s time for the exit inspection, tenants will have accurate, documented proof of the condition of the property from when they moved in. The software system preferred by Just Property agents allows for comparison reports that show incoming and outgoing images and associated notes side-by-side.

TENANTS, EXIT WITH CARE

At Just Property, detailed property inspections address each room and area of the property, individually listing:

The items in each space (e.g. ceiling, electrical sockets, floor, lights/ light fittings, curtains/ blinds, cupboards, skirting and walls),Their current condition (e.g. clean/ dirty, working/ not working, cracked/ undamaged),Recommendations (e.g. landlord to repair/ tenant to replace) andAssociated photographs as evidence

When it is time to exit a property, tenants should take the time to review the incoming and any interim inspection reports and should compare the current condition of the property with what was recorded. Any deviations should be addressed immediately; a deep clean of the property once all tenant possessions have been removed, replacement of missing keys or remotes and the repair of any faulty lights or appliances should avoid most potential problems.

If there are more complicated matters or bigger deviations, then tenants are best advised to talk to the landlord or managing agent to agree on a way forward, including the scope of remedial work, the contractor to be used and the anticipated costs. That way, there are no nasty surprises for the tenant when unexpected amounts are deducted from the deposit, or when there are delays in paying the deposit.

Keeping a paper trail of all communication between the tenant and property practitioner is important. This allows for transparency from both parties.

WHEN SHOULD THE DEPOSIT BE PAID?

Click here to read about the deposit refund process.

If the property is in tip-top condition and there are no damages, the tenant should receive their full deposit.

There are milestones at 7 and 14 days after the termination of the lease, and then another 14 days after the restoration of a property (if there were damages). If there are outstanding amounts from the tenant, then the landlord can use the deposit to pay for anything such as outstanding rent or utilities and damages to the property.

Remember, your full deposit is not guaranteed. It is best to have saved up for a new deposit and the first month's rent before terminating your old lease.

IF THINGS GO WRONG

Although all Just Property franchise offices are independently owned and operated, there is a dedicated Customer Experience team at Just Property Head Office that serves to triage complaints and disputes. This mediation helps to ensure that all parties understand their responsibilities and rights, as agreed in the lease agreement. This centralised, objective escalation point also allows the Head Office team to monitor customer sentiment and help to maintain good relations. It is a testament to the strong relationship the Head Office team has with the franchise network that this structure can exist.

And, if all else fails, tenants have the option to take their disputes to the Rental Housing Tribunal.

For more useful tips, you can visit the Just Property blog.

For more information on Just Property, please visit www.just.property or call (087) 583 3333.

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