Why Incoming Inspections Matter: Compliance, Risk and Consequences

Why Incoming Inspections Matter: Compliance, Risk and Consequences

The Rental Housing Act[1] (RHA) is the prevailing legislation in respect of residential leases in South Africa.

Section 5(3)(e) of the RHA requires the Landlord and the Tenant, prior to taking occupation of the premises, to jointly inspect the premises for the purpose of ascertaining and recording the condition thereof.

The inspection serves as confirmation of the condition of the premises at the time that the Tenant is to take occupation of the premises. Any defects or damages to the premises should be identified, either for the Landlord to rectify prior to the Tenant taking occupation, or depending on the nature thereof, simply for the purposes of noting that the defects and damages were present prior to the commencement of the lease and that the Tenant will not be liable to cover the costs of reparations thereof at the expiration of the lease.

The inspection protects the Landlord and the Tenant from potential disputes later on. Importantly, the condition report will set a standard upon which to assess the premises at the expiration of the lease to ascertain whether there are justifiable deductions to be taken from the Tenant’s deposit.

Crucially, the inspection is to be done jointly. This means that both the Landlord and the Tenant, or their agents, are to be present during the inspection.

There are severe consequences should the incoming inspection not be done in the manner as required by the RHA.

In the event of the Landlord failing to conduct the incoming inspection, the premises shall be deemed to have been received in good and proper condition. In this case, the Tenant will be entitled to receive their full deposit irrespective of whether they have caused damages to the property, as the Landlord will be precluded from deducting any amounts from the deposit at the expiration of the lease for the costs of repairing any damages to the premises. The Landlord would only then be entitled to recover amounts from the deposit for which the Tenant is in arrears – in the instance where the Tenant is behind on payments for rental or utilities, for example.

The Landlord and the Tenant can negotiate whether the Landlord is to effect certain repairs before the Tenant takes occupation, but the incoming inspection does not create the duty to do so. The incoming inspection serves the purpose of recording the condition of the premises at the commencement of the lease. There is an obligation, however, that the Landlord ensures that the premises is safe and habitable. In the event that repairs are necessary in order to make the premises is safe and habitable, effecting those repairs will be obligatory on the Landlord.

In an attempt to avoid disputes later on, we recommend to Landlord’s and managing agents to consider the following when holding the incoming inspection:

  • Create an inspection checklist of all the fixtures, features and appurtenances to the property, listing each of the rooms in the property individually, and including the condition of features such as swimming pools, driveways and intercom systems. (Photographs with notes attached are always helpful to avoid uncertainty as to what the factual position is.)
  • It goes without saying that the condition report should be in writing, however confirmation of the parties’ agreement thereto is imperative – parties should sign the inspection report and have same witnessed, with a recording of all parties present at inspection being confirmed.
  • The incoming inspection should be held as far in advance of the commencement date of the lease agreement as possible, allowing the Landlord ample opportunity to rectify any damages to the premises which may be present prior to the Tenant taking occupation. Try avoid a circumstance whereby the Tenant’s occupation is delayed due to any required renovations.

 

COMMON QUESTIONS

Can the Landlord utilise the Tenant’s deposit to cover the cost of reparations prior to the Tenant taking occupation of the premises?

No, the Tenant’s deposit is held by the Landlord for damages incurred by the Tenant during the subsistence of the lease, and not any damages present prior to their occupation. Any reparations required prior to the Tenant’s occupation is for the Landlord’s account.

Does the Landlord and Tenant need to be personally present at the incoming inspection?

It is always advisable that the two parties are present personally, however general practice allows for either or both parties to be represented by third-parties. A managing agent, therefore, can represent a Landlord should they be unable to attend personally.

What happens if the Tenant refuses to attend the incoming inspection?

The RHA stipulates that the incoming inspection is to be done jointly, however does not specify the repercussions on the Tenant in the event that they refuse to attend. In this instance, the Landlord is advised to take photographic and video evidence of the premises prior to the Tenant’s occupation for documentary proof. The risk will be on the Tenant as to whether the evidence will be a true reflection of the premises’ condition. Most lease agreements afford the Tenant an opportunity to note any defects which they become aware of within the first seven days of their occupation however.

Does a premises need to be handed-over defect-free?

It is always advisable that the Landlord rectifies as many defects as possible prior to the Tenant’s occupation of the premises. However, provided that the defects are not material to the Tenant’s use, enjoyment and occupation of the property, there will usually be discretion applied to the defects and the required reparations thereof.

In summary, the incoming inspection is vital to the protection of the interests of both the Landlord and the Tenant. Active participation by both parties may lead to the avoidance of expensive disputes which will inevitably arise at the expiration of the lease.

[1] ACT 50 of 1999.

 

Rental Payment Fraud

Rental Payment Fraud

I paid my rental into the wrong bank account due to fraud!  What do I do now?

– tenant

 

My tenant paid the rental, but to a fraudulent account! What do I do now?

– landlord

 

Electronic Fraud

Payments are made by Electronic Fund Transfers (EFTs) on a daily basis. With the increase in the frequency and ease of EFT payments, we have seen an increase in associated fraud.  Webb Attorneys was recently instructed to advise on this very issue.

 

The facts

The tenant received the rental invoice from the landlord via email, the date on the invoice was incorrect and the tenant requested that the landlord resend a revised invoice with the correct date.  Within a few minutes, an updated invoice was sent to the tenant from the same email address, with the correct date, as well as a request to make all future payments to new banking details. The tenant proceeded to pay the rental to the new bank account. When the landlord had not received the monthly rental she followed up with the tenant for payment only to discover that it had been paid but into an account that was unknown to the landlord. . Investigations revealed that the emails had been intercepted and the banking details were traced to a third party who is not known by the landlord or the tenant.

 

So what next?  Who is liable?

Is the tenant obligated to pay again, or should the landlord forfeit her monthly rental income?

The contractual basis for the landlord’s claim is the tenant’s contractual obligation to pay rental to the landlord as compensation for the use and enjoyment of the leased premises.

The tenant argued that they had made payment of the rental (the amount had left their bank account) and that the landlord was entitled, as per the lease, to change her bank account details via email, which “she” appeared to do.

 

The legal position

This dispute was heard by the Western Cape Rental Housing Tribunal.  It found, as per our advice, that the tenant had not fulfilled its contractual obligation to pay the landlord, as payment had not been received by the landlord.

The Western Cape Rental Housing Tribunal highlighted the duty of a tenant (payor) and any debtor, to “seek out the creditor” and ensure that payment is received. Hence there is an obligation on any tenant/debtor to confirm whether the banking details for payment are correct.

 

In Galactic Auto (Pty) Ltd v Venter (4052/2017) [2019] ZALMPPHC 27, Venter (the debtor) made payment into the wrong bank account as per an email sent by a hacker. Galactic Auto delivered the vehicle to Venter but did not receive payment from  Venter. Furthermore, Venter benefited from the continued possession of the vehicle. Venter testified that he bona fide believed that the money was paid to Galactic Auto and received in their account. The Court found that:

 

“The Defendant failed to verify the banking details with Pulane [Plaintiff] before he made payment of the purchase price by way of EFT. The Defendant merely assumed that the e-mail with banking details attached to it came from Pulane” [para 49.2 of the judgement];

 

“The Defendant had in fact paid the money into a wrong and fraudulent account. He had been defrauded by hackers who stole his money after they have changed the banking details on the said e-mail” [para 49.3 of the judgement];

 

“If the Defendant had only verified the banking details with Pulane he would have prevented his loss. His failure to do so was at his own peril” [para 49.4 of the judgement];

 

“The principles to be applied in cases where payment has been intercepted and misappropriated by a thief have been concisely summarized by Nienaber J (as he then was) in Mannesmann Demag (Pty) Ltd v Romatex thus: When a debtor tenders payment by cheque, and the creditor accepts it, the payment remains conditional and is only finalised once the cheque is honoured… That risk is the debtor’s since it is the debtor’s duty to seek out the creditor” [para 51 of the judgement].

 

Here are some useful tips:

1.    Check, check, check! Don’t take anything at face value. Scrutinise the email address, look for spelling and grammatical errors;

2.    Many agreements contain a non-variation clause which provide that any and all changes to the agreement are to be made in writing and signed by all parties; ensure that your banking details cannot be changed simply by sending an email;

3.    Ensure that your electronic device is up to date with malware;

4.    Verify the bank account on your banking app or via online banking; and

5.    Confirm the invoice and banking details or any change thereof sent via email by making a telephone call and/or sending a WhatsApp.

 

Where does this leave the tenant?

The tenant has been defrauded, which is not without recourse, but falls outside the ambit of the tenant/landlord relationship. The tenant would have to follow the bank’s fraud procedure and report the theft/fraud to SAPS.

While it is clear that it is the tenant’s responsibility to ensure that the banking details are correct and that the landlord receives the payment, we advise that all debtors and creditors be aware and triple-check before making payment. Contact Webb Attorneys for further assistance.

Written by Mpho Matubatuba and Chelsea Swanepoel (January 2023)