The importance of a good lease agreement

 

Attention to detail is the name of the game when it comes to drawing up a lease agreement. A good lease agreement that satisfies the many legal requirements is invaluable in successfully renting out your property.

The lease agreement is the foundation of the agreement between owner and tenant. If there is ever a dispute and you need to go to court, it is the first document the court would ask for. The weaker your agreement is, the weaker your legal case will be.

Many property owners simply reuse their previous lease agreement or pop down to their local legal stationer and buy an off-the-shelf lease agreement. This, in our opinion, is a big mistake as these contracts are mostly very general and you are not guaranteed that they are up-to-date with current legislation.

There are two main Acts that inform RentMaster’s lease agreements: the Rental Housing Act, which focuses specifically on the rights of tenants and landlords; and the Consumer Protection Act (CPA), which was designed to protect the rights of the consumer – or tenant in this case. When drawing up a lease agreement one should bear in mind that anything specified in legislation will always trump anything you might specify in your agreement.

CONTRACT

At RentMaster our legal experts keep abreast of all the changes in legislation and new court rulings that may affect future tenant/landlord relationships, and as such you can be guaranteed a watertight lease agreement. And what’s more, it’s part of the service we offer and you don’t pay extra for it.

It is a good idea to consider the lease agreement as a living document, which you can update and amend as issues arise. Remember that any amendments you make need to be in writing and signed by both parties.

The term of the agreement

This defines the duration of the agreement, in other words the period that the agreement is valid. Most lease agreements provide for renewal after the term ends. According to the Consumer Protection Act (CPA) no lease agreement can have a term of longer than two years. Should your agreement be for, say six months, you have the option to renew it three times. After two years the landlord and tenant need to sign a new agreement – this is any case a good idea because then you get an updated agreement.

Cancellation vs termination

The CPA states that the tenant can cancel with 20 working days notice. If the tenant terminates before the end of the lease term, the Landlord is entitled to charge an early cancellation penalty. Generally, the landlord may not terminate the agreement early unless the tenant is in breach, has been properly notified and has failed to rectify the breach. The subject of notice periods is quite a complex one and we will dedicate a full future Nuts & Bolts article to it.

At the end of the lease

If the tenant stays on at the end of the lease with the express or tacit agreement of the owner and the lease agreement is not renewed, terms of the previous lease agreement remain in force with the exception that both the owner and tenant have the right to terminate with a calendar month’s notice.

If the lease has expired and a periodic lease is in place, the tenant can cancel on a calendar month’s notice, she will not be obliged to pay any early cancellation penalty. In other words, the Landlord has no claim or recourse against the tenant if he has costs such as advertising costs, agents’ fees or if he can’t find a tenant and is out of pocket.

It is always a good idea to have a written, fixed terms agreement in order to enjoy the benefits of the CPA – and to ensure that your rights are protected by an updated lease agreement.

The nitty gritty

A valid lease agreement must include the full details of both the lessor and the lessee including full name, ID number, address and contact details. All contracts should have a “domicilium” clause – a clause that directs how and where legal notices and Letters of Demand and/or Cancellation may be sent. If the information is not completed in full, this could cause time delays should you have to proceed with legal action against your tenant. Remember to also include the full details of the dwelling: erf number, street number suburb, city and postal code.

If there are occupants other than the lessee, it is a good idea to have their names and full details included in the agreement. It is also recommended to explicitly limit the total number of occupants and require the tenant to notify you in writing of any changes to the occupants. You should also state clearly if you don’t want the tenant to sublet.

Record the security deposit and rental amount to be paid with specific emphasis on the day of the month that the rent must clear in the owner’s bank account. It is generally a good idea to get a debit order authorisation from the tenant.

If the property is part of a community scheme such as sectional title or a homeowners’ association, it is important to record the tenant’s duty to comply with the rules of that scheme and to attach a copy of those rules to the agreement.

It is advisable to be very clear about the intended use of the property. In other words, state that it is for residential purposes and that commercial and any illegal activities are forbidden. You may also include restrictions on parking, pets access by visitors, etc.

Sundries

Any other amounts that you expect the tenant to pay, such as municipal services, gardening services, armed response services, lease administration fees, etc., must be expressly stipulated. It is important to note that the owner is always liable to pay rates and taxes. Many Landlords incorrectly assume that by registering the municipal services bill in the name of their tenant, they will not be held liable for payment, should the tenant fail to pay during their occupation. The owner of the property is always legally liable for the municipal services bill.

If you require the tenant to be responsible for specific maintenance on the property, such as the garden, gutters, etc., it should be explicitly stated in the agreement.

Dotting the I’s, crossing the t’s

The lease agreement must be properly signed – including the date and place by all parties and also properly witnessed. All pages of the contract and addenda must be initialled by all parties and witnesses.

Remember, if this sounds way too daunting, you can always task us to help you draw up a watertight lease agreement… and we’ll guarantee that your rent will be in your bank account on the first of the month!