14 April 2023
Upon signature of a lease agreement, a damage/security deposit will be required. The amount of the deposit may vary, but can be up to the equivalent of two months of the rental amount. The deposit amount will be specified in the lease agreement and both parties will sign in agreement thereof.
A damage/security deposit is required to safeguard the landlord against any damage that may occur to the property as a result of renting it out. The landlord will need to ensure that the deposit is kept in an interest-bearing account during the lease period. The deposit (with any interest incurred) will then be refunded to the tenant upon the termination of the lease agreement should there be no damages found, as a result of an inspection, to the property. This deposit is an upfront payment and is required upon signature of the lease agreement and should not be paid off over a period of months.
It is important to note that the deposit may not be utilised until the expiry / termination of the
lease agreement. In other words, it can not be used in lieu of rental, utilities, or to effect repairs that occur during the lease period. It can only be used once an inspection has been concluded and damages have been identified. The deposit will then be utilized to repair any damage to the property that was caused by the tenant during occupation. The balance (if any) of the deposit will then be refunded to the tenant in accordance with the timeframes stipulated in the Rental Housing Act.
Once the outgoing inspection has been completed and signed by all parties, it will be compared with their incoming inspection to assess damages (if any). At this point, the tenant will have no further opportunity to remedy any damage themselves. Should there be repairs that need to be done, the landlord will need to obtain quotes for the work that is required. Repairs will then be effected of which the cost will be deducted from the tenant’s deposit.
Let’s breakdown what the deposit may be utilised for, and the timeframes in which a deposit should be refunded:
- Any damage that is identified by inspection that is the responsibility of the tenant to maintain and is not identified as fair wear and tear. For example, repairing of internal walls should the tenant have driven nails into the walls to hang pictures; cracked tiles, broken stove plate etc.
- Any outstanding amounts owed by the tenant in respect of rental, utilities, lost keys, Body Corporate fines etc.
- Should no damage be found, the deposit must be refunded within 7 days of the termination of the lease agreement
- Should damage be identified, the amounts will need to be deducted upon receipt and the deposit will need to be refunded within 14 days of the termination of the lease agreement
- Should a tenant not be present during the outgoing inspection, the deposit will only need to be refunded within 20 days of the termination of the lease agreement
Should a lease agreement be renewed for another term, a top up of the damage/ security deposit is required. The top up will be the same amount as the escalation in the monthly rental amount. It is important to keep in mind that a tenant will also need to budget for this top up when considering the rental renewal for another lease term.
