Rental Deposits: Do’s and Don’ts
The information in the article is courtesy of Realestateweb, (“Tenant’s rental deposit: what you need to know”, 14 November 2008)
Realestateweb’s columist, Mike Spencer – property valuer, estate agent and sectional title expert – explains some factors regarding a tenant’s deposit.
Firstly it is good to know that the purpose of a deposit is to cover unpaid rental, damages to the property, inspection fees and unpaid bills.
According to Spencer, when you use a management agent to look after your property, they usually keep the tenant’s deposit in their account. As a landlord, you do not have to pay interest on that deposit nor do you have to open a separate bank account, although larger companies might run a special bank account for individual deposits and pay interest, but this is unusual.
One thing to keep in mind, Spencer said, is that the deposit is kept up to date so that if the rent increases the deposit should be increased to keep it up to the full level required.
As a landlord you are allowed to ask more than a month’s rent as a deposit. Some agencies ask one and a half or 2 months’ rent. When you have to use the deposit to cover cost, remember to keep all receipts.
A question that is often asked is when you should pay back the deposit if there are no damages. Spencer says that the deposit needs to be paid back within 7 days of the evacuation of the property should there be no damages. If there are damages it should be repaid within 14 days, but this might sometimes be delayed if you need to get contractors to fix the damages.
Remember to always get proof that all water and electricity bills have been settled before you pay back the deposit. When water and electricity is paid by the body corporate stick to the rule “no final account, no deposit”.
Don’t make the mistake of letting your tenants pay off the deposit over a period of time. If a tenant can’t afford the deposit they are probably going to struggle to pay the rent, too.
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