Rental Housing Amendment Bill

Will the changes to rental housing law be for better or worse?

What rental housing law currently states

At present the Rental Housing Act 50 of 1999, section 5, stipulates that a lease between a tenant and landlord need not be in writing or be subject to the provisions of the formalities in respect of the Leases of Land Act, but this is set to change with an Amendment Bill before Parliament. The Rental Housing Amendment Bill proposes some critical changes to the current Act, but will they protect the landlord or the tenant?

The current Act stipulates that while a lease need not be in writing, a landlord must reduce a lease to writing if the tenant requests this, but the Amendment provides that the landlord must reduce the lease to writing. This means that while a verbal lease is still binding, there must be a written lease, but the Amendment does not impose a penalty if this is not done.

Benefits both the landlord and tenant

This proposed change supports both the tenant and the landlord. Rights and obligations will be easier to prove with a written contract and will go a step further in protecting tenants from unscrupulous landlords. One aspect of the Rental Housing Amendment will also be a pro forma lease developed in all 11 official languages. This can only be a positive from both the point of view of the landlord and the tenant and will ensure there is no confusion on either side as to what the responsibilities of both parties are. In addition, it will benefit the Rental Housing Tribunal, which hears and rules on rental disputes.

A clear and understandable lease written in a language both the landlord and tenant can understand will assist the Rental Housing Tribunal, but the amendment will also propose changes to the Rental Tribunal. Arno Botha, the current chairperson of the Rental Housing Tribunal in the Western Cape, says, “Currently there is no appeal against a ruling by a Tribunal. The amendment provides for an appeal, although the exact mechanism has not been spelled out and will have to be done by way of regulation.”

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A rental housing body’s standpoint

The Western Cape Rental Housing Tribunal (WC RHT) opposed the Rental Housing Amendment for inter alia the following reasons:

• At the WC RHT, more than 90% of the cases are in relation to the failure to refund the deposits, of which the majority are for amounts less than R10 000.
• It needs to be mentioned that in the Small Claims Courts, which has a jurisdiction of R15 000, there is no right of appeal either.
• The majority of tenants who claim for a refund of their deposits are people who cannot afford to pay a deposit for the next lease before being refunded the current deposit. The right of an appeal will extend the dispute for at least two to three months longer than at present. It will work against the poorer people.
• The WC RHT believes that Rental Housing Tribunals should be given the power to order evictions. “We see many instances where tenants are not paying rent knowing that it is difficult and expensive for landlords to obtain eviction orders in other courts where the landlords need attorneys, whereas the services at Tribunals are free,” says Botha. The right of appeal will actually lengthen the dispute process and, while the exact nature and process for this appeal process has yet to be released, it will not help tenants or landlords. It could see a simple case being appealed and dragged on for months, costing both the tenant time and the landlord money.

An estate agent’s point of view

Bruce Swain, managing director of the Leapfrog Property Group, believes the Rental Housing Amendment Bill is problematic and that the government is once again assuming that tenants deserve more protection than landlords. He is referring to the cooling-off clause that was legislated and saw purchasers below a certain price bracket given the option of a seven-day cooling-off period to decide whether to proceed with the purchase agreement or not.

Swain says, “The assumption, then and now, is that purchasers deserve more protection than sellers. This is blatantly untrue as one could have an instance where a purchaser with years of experience in buying and selling could make an offer to a seller who is selling property for the first time. In this case, the more experienced party could take advantage of the inexperienced party just because the legislator erroneously thought that the seller needs less protection that the buyer.” Could the Amendment Bill be following suit and allowing more experienced tenants to take advantage of less experienced landlords?

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Rental Housing Amendment Bill broken down

Swain’s answer is yes, and he highlights several proposed and problematic changes that will, in effect, see landlords disadvantaged in favour of tenants by the legislator:

1. On termination of the lease it is now the landlord that must arrange for a joint inspection, it is no longer a joint responsibility. There is no reason or explanation why there should be a bigger onus on the landlord to do this than the tenant, and until now there was ensured co-operation and participation by the tenant.
2. Failure to heed the tenant’s rights is now a criminal offense and a landlord can therefore face a fine or imprisonment exceeding two years. This does not apply to the tenant. This is really hard to understand. In most cases a tenant views a property, decides to enter into an agreement of lease and occupies into exactly what was anticipated. On the other side the landlord does not know if the first month’s rental will be paid. I am not aware of any statistics but I am pretty sure that more contracts of lease are broken by tenants than by landlords.
3. The Bill states that the landlord “must provide the tenant with accommodation that is fit and suitable to live in…”. There is, however, not a definition of what “suitable to live in” is. One could argue that reasonableness should apply but then one can also argue the landlords and tenants could, by definition, be equally unreasonable.
4. The Bill states that the landlord must facilitate the provision of facilities where possible — a vague clause that, once again, can build contention into an agreement that wasn’t there before.
5. The legislator probably has good intent by determining that all the agreements should be in writing — surely that would limit misunderstanding. One must, however, not forget that this clause complicates matters for all. It sounds as if in congress you can buy many things for millions of rands on a verbal agreement but a lease agreement for as little as R500 per month has to be reduced to writing. Of course it also raises the question: What happens when both landlord and tenant neglect to do this in writing? Is the tenant in that case not less protected? Should it then be argued that no contract of lease was entered into? One should not forget that the only agreements that, in legal terms, must be reduced to writing are antenuptial contracts, sale of land, suretyships and wills — hardly as potentially insignificant as a three months’ contract of lease.
6. There is also the onerous proposal that the Department will make available standard agreements of lease in all 11 languages — an incredible cost and a situation that might lead to a seller signing in one language and the tenant in another.

Do you think the proposed Rental Housing Amendment Bill is good for the industry? Share your thoughts in our poll (in the right side bar).

“Looking at the first point above — it is in the best interests of both the tenant and the landlord for an inspection to be done as fast and effectively as possible; the landlord needs to repay the deposit and needs the tenant to vacate the premises for a new tenant and in many cases the tenant needs the deposit for a deposit on a new rental. But, to place the responsibility on only the landlord does seem short-sighted. Surely the onus of the joint inspection should be jointly shared?” says Swain.

“The second point seems rather draconian in reality, and is very open-ended, when the amendment says failure to heed the tenants’ rights. What right exactly does the Amendment refer to? Should the Amendment be passed with such a vague term for a very serious punishment, it would be to the detriment of the property industry. Why would anyone want to become a landlord with such severe and rigorous laws that, if broken, could see them in jail for up to two years? The draconian web of laws will put off potential buy-to-let investors.

“The fourth and fifth points, again, seem very contentious. While it is a positive step towards ensuring that when things break or need to be repaired, they are done timeously, it also allows for a lot of leeway in interpretation. Should there be a definition of what ‘suitable to live in’ encompasses and what facilities must be provided, then this clause could work towards bettering the rental landscape.

“While having a rental agreement in all 11 official languages is a positive step in ensuring that every person in South Africa is represented, it will fall to a government department to ensure that this task is done, which begs the questions: Should the Amendment be passed? Will the leases be done timeously? Will there be provisions that ensure there is no confusion if the tenant does, in fact, sign in one language and the landlord in another? Another aspect that could muddy the waters are leases that have special clauses and exceptions, leases that vary from the standard — will these also be translated into the language of the tenant and landlord?” concludes Swain.

Bill Rawson, chairman of Rawson Property Group says, “The changes in the act will, in the long run, probably be good for property owners because it could close many loopholes in the act which, at the moment, landlords sometimes, on the advice of unscrupulous lawyers, have been able to exploit. The Rental Housing Act is widely considered a good piece of legislation. However, as a result of the growing trend towards helping previously disadvantaged people wherever possible and preventing their being exploited, the magistrates have inclined, in the opinion of landlords, to be too soft on non-paying tenants, especially if they have, as is often the case, become unemployed and appear to have no alternative accommodation. It is sometimes forgotten that many buy-to-let investors have bonded their property heavily and rely on monthly bond payments that they can only meet if their rents are paid.”

The amendments that are being proposed seem skewed in favour of the tenant and place a lot of open-ended responsibility on the landlord. While there is no doubt that evening the buy-to-let field for both tenants and landlords can only be in the best interests of the property industry, the Amendment Bill needs clarification before it can be seen as a positive piece of legislation.

The proposed Rental Housing Amendment Bill has significant improvements to assist landlords and, likewise, tenants. Penny Chenery, partner in the real estate team at International law firm Hogan Lovells, gives an overview of the amendments:

The Rental Housing Amendment Bill summarised

Among the various amendments, are the following noteworthy changes:

1. Leases are to be put in writing. The onus will be on the landlord to do so.
2. The addition of certain rights and obligations for both tenants and landlords.

How it will impact tenants

• The right to request written receipts that include dates, address or description of the property to which they relate, whether for rental or arrear rental or deposit payment or otherwise, and also stipulate for which period payment is made and received.
• The right to request written proof of interest accrued on the deposit paid.
• The right to privacy, which includes the right not to have the property searched or seized without a ruling by a court or tribunal.
• The right not to have communications infringed.
• Costs not included in the lease agreement can only be deducted upon proof of such expenditure.
• Consent to sub-let may not be unreasonably withheld.

How it will affect landlords

• The deposit received from a tenant is to be invested in an interest bearing account with a financial institution at an interest rate not less than that on a savings account.
• Various time frames have been set out that must be adhered to by the landlord relating to inspection of a property and/or refunding of deposits.

Do you think the proposed Rental Housing Amendment Bill is good for the industry? Share your thoughts in our poll (in the right side bar).

Words: Angelique Redmond