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Tenants cry foul over lease fees charged by estate agents

11 Apr 2018

The Estate Agency Affairs Board will investigate the fairness of the practice among rental agents of charging tenants lease fees, Bongani Mlangeni, the board's communications manager, says.

The charging of lease fees, also referred to as administration fees, is widespread. A total of 66% of agents surveyed by property credit bureau TPN charge tenants administration or lease fees.

Of these, 57% charge the fee again when the lease agreement is renewed. It is specifically this second round of charges that the EAAB will be discussing with agencies.

The national average for lease fees is R927 but it can be as high as R2850 and the lowest is R100, according to the TPN survey.

Nationally, 70% of agents charge between R500 and R1000, 27% charge more than R1000 and 3% charge below R500.

Mlangeni says that since there are no laws forbidding agents from charging these fees, the board is limited in what it can do about the practice.

"However, we plan on engaging our stakeholders to discuss whether this is fair and ethical," he adds.

The board has received some complaints about lease fees but has not been able to intervene because the fees are a contractual issue agreed to by the parties and the consumer who signs the lease agreement.

The board has only been able to intervene in cases where the agent failed to disclose the fee in the contract.

Mlangeni urges consumers to read the terms and conditions in a rental contract before signing, and to negotiate any terms that are unsuitable to them with the other party.

Tenants seeking accommodation in South Africa, particularly in high-demand areas, have to fork out a substantial cash sum in order to secure a property.

In addition to the rent for the month ahead, they are asked to pay a rental deposit of between one and two months' rent, possibly key and services deposits, and lease fees.

On a property that is being rented out for, say, R10000, a tenant can easily be charged R33000 in the first month - the month's rental, a deposit of R20000, a lease fee of R1000, a key deposit of R1000 and a services deposit of R1000.

Tenants frequently question the lease fees on social media. One member of a social webpage asks whether an estate agent who fills in a photocopied contract can charge an R800 lease fee when the lease agreement makes no reference to the fee. Another first-time renter faces a lease fee of R1500, and a third queries a R1500 lease fee that an agent wants to charge to renew his lease.

Cilna Steyn, of specialist property law firm SSLR Incorporated, says that under the Consumer Protection Act agents have a duty to explain the terms of a lease to a tenant.

Going through the clauses in a lease agreement so that the tenant really understands what they are getting into can easily take an hour or more of the agent's time, so a fee of R1000 or R1500 is fair, she says.

Presently lease agreements do not have to be in writing unless requested by the tenant, and when it is in writing it is an expense incurred by the agent for the tenant's benefit. The cost of a lease agreement is therefore for the expense of the tenant, she says.

The position will remain unchanged when the Rental Housing Amendment Bill, which stipulates that lease agreements have to be in writing, is promulgated.

Tenants are not paying for the actual cost incurred by the agent to obtain a lease agreement, which costs from a few rands from a stationery store, to R850 a year from TPN (which offers attorney-drafted lease packs) or anything up to R25000 that an attorney could charge to draw up a lease, Steyn says.

Instead, tenants are paying for the time spent by the agent, she says.

Whether all agents should charge a lease fee depends, according to Steyn.

"I can easily see from a lease agreement which agents have taken the time and effort to fill in the lease agreement properly and explained it to a tenant. I can honestly say that these agents deserve to earn a lease fee," she says.

"Other agents half-heartedly fill out a lease agreement purchased from a bookstore and then we have to go and figure it out in disputes in court," she says.

Mlangeni says the EAAB's code of conduct requires an agent to act in the best interest of the consumer and therefore an agent who wishes to charge any fees must ensure that the consumer is aware of the fees that are to be levied by the agent.

Should the agent fail to disclose to the consumer the fees applicable to any lease, the agent can be said to have failed to act in the best interest of the consumer and can be held to be in contravention of the code of conduct, which may result in sanctions against the agent, he says.

According to Steyn, the Rental Housing Tribunal takes the view that agents can only charge a fee that they can explain and show what work was done to earn the fee.

It is crucial that the tenant is aware of the charges.

The Rental Housing Act states that a tenant is liable for rental and other costs agreed upon in the lease, but for costs other than those agreed to in the lease agreement, the tenant is only liable for reasonable and proven costs the landlord incurs.

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