The Damage Deposit Dilemma - Rent-Rite Blog

The Damage Deposit Dilemma

A damage deposit is standard practice with rentals, but is often the thing that creates the most conflict, especially when tenants move out and amounts need to be set-off for repairs. If the matter isn’t handled properly it can quickly get out of hand end up at rental tribunal or even court.

To understand what is expected from tenants and landlords when it comes to a damage deposit, the rental housing act must be considered. In the act the following is specified:


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A landlord may request that a damage deposit be paid over before moving into the property. The amount may not exceed the before agreed upon amount and the owner must keep this money in an interest bearing account and if the tenant requests it, the owner must provide the tenant with proof of the interest accrued.

The landlord and tenant must jointly do an inspection of the premises before the tenant moves in and list all defects. A list of these defects must be attached to the lease.

When the tenant moves out the landlord and tenant must jointly do an inspection of the premises on a mutually convenient time within a period of 3 days prior to the expiry of the lease to ascertain if there was any damage caused to the dwelling during the tenant’s occupation thereof.

On the expiration of the lease, the landlord may apply such deposit and interest towards the payment of all amounts for which the tenant is liable under the said lease for example arrears rent, water, electricity or any other amenities/expenses specified in the lease, including reasonable cost of repairing damage to the dwelling during the lease period and the cost of replacing lost keys. The balance of the deposit and interest, if any, must be refunded to the tenant not later than 14 days of restoration of the dwelling to the landlord. Upon request the landlord must supply the tenant with relevant receipts which indicate the costs which the landlord incurred to repair said damages.

The following factors must be considered by the landlord when setting up the damage deposit:

  • The market average for a deposit at present is equal to one to two month’s rent, not including additional deposits, such as a key deposit or pet deposit. This isn’t always a good measuring stick as lower-end rentals that are more affordable are often those that attract the most troublesome tenants and damages can easily exceed this amount.
  • Affordability is also often an issue as tenants cannot always afford to put down two month’s rent as a deposit.

Is there an alternative to a damage deposit and avoiding all these issues? There is a way to protect landlords and make that protection affordable for tenants- It’s called PayProp Deposit Guarantee, and it’s brought to you by the same people who pioneered PayProp, the online rental and financial management platform trusted by leading estate agents to automate the monthly administration of more than 60 000 properties.

Deposit Guarantee covers landlords for rental losses of up to 2.5 times the monthly rent – more than is possible in all but the most exceptional cases under the deposit method. It requires an upfront premium from the tenant of only 35% of the rental and a minimal monthly amount of 1.25% from the second month – while affording protection for as long as the lease is running and at the tenant gets a cash back bonus if there is no damage to the unit at the end of the lease.

So the perks are simple: less cost to the tenant – more protection for the landlord an offer well worth considering!


If you would like to learn more about this product, feel free to contact your nearest rental agent, Rent-Rite at 021 853 1017.