The real cost of renting a home in South Africa

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André van Rooyen from automated rental payment provider PayProp says that while they may budget for the monthly rental and security deposit, understanding other standard rental fees can help them go into a rental agreement with their eyes open.

PayProp handles more than R1bn in transactions each month. Van Rooyen says data from the company’s most recent State of the Rental Industry survey reveals a range of additional fees typically charged in residential rental contracts:

• Application fee: A non-refundable fee averaging R250 to cover the costs of processing their application, including a credit check. Note that you don’t get this back even if you don’t sign the lease agreement, but you are entitled to request a copy of your credit report. If your application was unsuccessful due to affordability or bad credit, your report will give you some great insight as to why.
• Initial lease fee: A non-refundable fee that covers the costs of creating and executing your new lease agreement, including administrative expenses and legal documentation. The average fee is R1,000, but it varies a lot by area. In some high-demand places, tenants can pay up to R2,000.
• Incoming inspection: Joint incoming and outgoing inspections are a legal requirement under both the Rental Housing Act and the Property Practitioners Act.

  An incoming inspection fee pays for the detailed inspection of the rental property before you move in, documenting its condition to ensure any existing damages are noted and to provide a basis for comparison at the end of the lease. The average fee is approximately R500, and is usually (but not always) charged to the landlord.

• Monthly administration fee: A fee averaging approximately R100 per month that covers the monthly management costs associated with the rental.

  These fees are sometimes mistakenly thought to be illegal, but in fact rental agents may charge them as long as they are laid out in the lease agreement, and they may become increasingly common as more rental agents seek to recoup the time spent doing monthly invoicing, arrears chasing, maintenance call-outs and the like.

• Outgoing inspection fee: This fee of approximately R500 covers the detailed inspection of the rental property once you vacate. This is a legal requirement just like the incoming inspection, and it’s also the first step towards getting your deposit back. If there is no damage beyond normal wear and tear, the landlord must return your deposit with interest within seven days of the end of the lease.
• Interest on arrears: With luck this won’t come up, but landlords and rental agents can legally charge interest on any rent payments you miss. A specific interest rate could be agreed in your rental agreement, as long as it is reasonable and does not break any applicable laws. The common practice in South Africa is 24% per annum (2% per month).
  However, if you agreed that interest is payable on late payments but didn’t set an interest rate, then you can be charged at the maximum rate provided for in terms of the Prescribed Rate of Interest Act (currently at 11.25% per annum). And if there is no provision for interest at all, your landlord can’t charge it on late payments.

Van Rooyen says that the Consumer Protection Act dictates clearly that all fees and charges must be disclosed to a tenant before entering into a lease agreement, but also says that rental applicants need to be proactive.

“While it is the responsibility of the property professional to outline the charges applicable, you should also ask your rental agent about any extra fees that you might have to pay. These fees are all national averages, and so they can vary a lot depending on the property and the area you are looking at.”