Most rental agents have traditionally paid the interest accrued on tenants’ damage deposits while in their trust accounts back to the tenant, but they actually need to check their lease agreements before doing so, advises Annette Evans, regional manager of the Institute of Estate Agents, Western Cape.
If the lease agreement used does not give a clear instruction as to where the interest should go, there is no obligation to pay the interest on these deposits back to the tenant but this interest amount does, however, get split between the agency who holds the trust account and the Estate Agents Fidelity Fund.
This is an issue that was brought up recently by an agent who, after many years in the industry, had automatically refunded the deposit, along with the interest, back to the tenant.
Pierre Olivier of the Estate Agency Affairs Board was asked to clarify matters and he referred to the provisions in respect of interest on monies held in trust, which is in set out in the Estate Agency Affairs Act, 112 of 1976.
In essence, he said, the provisions state that all interest earned on monies held in trust (Section 32(1)-accounts) or savings or other interest-bearing accounts (Section 32(2)(a)-accounts), which have not been specifically nominated for the benefit of a contracting party (in respect of a lease or sale agreement) or stipulated in a mandate, is payable to the Estate Agents Fidelity Fund.
When receiving trust monies in respect of a contract of sale or lease, estate agents must disclose to the parties that unless they agree in writing (in a separate document or provision in the agreement), to whom the interest earned on the trust money is to be paid, the interest earned will accrue in favour of the Estate Agents Fidelity Fund, said Olivier.
Estate agents may deduct and retain 50% of the interest earned on trust monies (where there is no mandate in respect of such interest) when payment is made to the EAAB.
Furthermore, he said, there is no prescribed rate of interest, as this is determined by the relevant financial institution with whom the account is held and the Act itself does not require the trust account held in terms of Section 32(1) to be interest-bearing.
Evans advised all rental agents to check the relevant clauses in their lease agreements and to adjust them accordingly.