Must-knows for Renting Accommodation to Students: Inspections and Early termination of the Lease Agreement
As many universities face a “student accommodation crisis”, more and more people are investing in student accommodation. There are many advantages for doing so: students only require accommodation from February to November so you can also accommodate holiday makers in December and January; students usually receive a housing subsidy from the university or their parents so regular rental payment should not be a problem; students tend to be less demanding than older tenants; and there is always a high demand for student accommodation.
However, there are a few areas of concern, two of which we highlight here. Firstly, students tend to not inspect the property before moving in since they are busy with registration or do not appreciate the importance of this meeting with the landlord or his/her representative. Secondly, it is a concern that students drop out of university half-way through the year because of academic or financial pressure or unhappiness with their chosen field of studies. As a result, the landlord of a student complex is left with a vacant room not really suitable for a non-student tenant. This piece considers the implications of the above areas of concern.
The relationship between a landlord and tenant is regulated by both the Consumer Protection Act (hereafter the CPA) and the Rental Housing Act (hereafter the RHA).
The RHA requires that leased premises should be habitable with all basics amenities being in a fair condition. The RHA further imposes a duty in all residential leases that there must be both an ingoing and outgoing inspection.
It is prudent for the landlord, when concluding the lease agreement, to agree on the time and date of the ingoing inspection. Afterwards, the details of the inspection must be written down and signed by both, and a copy must reach both the landlord and tenant. Importantly, if the student does not attend, the landlord must make sure to carry out the inspection nonetheless, record the details of the inspection and inform the tenant the inspection has taken place and attach a copy for his/her information.
With regards to the “outgoing inspection”, the RHA requires this to occur before the student has vacated the property. The student must be informed in writing that an outgoing inspection will take place and a reasonable time suitable to both parties must be arranged. Any possible damage to the premises must be debated, particularly to ascertain if the tenant is liable therefor.
If the student does not attend this inspection, then the inspection should still be carried out by the landlord and the landlord should maintain evidence that the tenant had been informed in advance. Should there be proof of damage to the property at the outgoing inspection, then the reasonable costs of repair may be deducted from the deposit. There are specific time limits set in the RHA for the return of the deposit to the tenant at the expiry of the lease, or the balance of the deposit in the event that repair costs were paid from the deposit.
Early termination of the Lease agreement
The CPA’s provisions regarding fixed term agreements also apply to residential lease agreements and entitles a tenant to terminate the agreement after giving 20 business days’ notice. The tenant may exercise this right at any time during the existence of the lease and it does not constitute breach of the agreement. Before the tenant can exercise this right, it is his or her duty to make sure all outstanding money owed to the landlord has been paid. Should a student in a student complex leave half way throughout the year or at a random time during the year, replacing such a tenant would be difficult because most students would have already signed a lease agreement for the year.
In most lease agreements, provision is made for a cancellation “penalty” in terms of which a tenant can exercise the right to terminate the lease prior to the intended expiry of the lease. The CPA allows the landlord to charge a cancellation penalty in the abovementioned situation, provided certain other pre-requisites are met in addition. The regulations to the CPA list factors to be taken into account in arriving at the determination of a reasonable penalty. These include: the expiry date of the lease agreement, the duration of notice given by the tenant, the general practice of the industry, and so forth.
What is a reasonable penalty would depend on the circumstances of each matter. It may be argued that in the situation where the tenant leaves half way through the duration of the lease, it would be reasonable to require the student to actively assist the landlord in finding another tenant and that the tenant should pay two months or more rent as a penalty.
In summary, it is important for both the tenant and landlord to participate in the ingoing and outgoing inspection in order to comply with obligations under the RHA. Reasonable amounts can be deducted from the deposit for any damages, fair wear and tear excepted, provided that there is evidence showing why the repairs were necessary.
In addition, should the tenant terminate the lease agreement in accordance with the CPA, the landlord can charge a reasonable penalty for cancellation. What is a reasonable penalty would depend on the circumstances of the case and the CPA regulations provide guidance in determining what a reasonable penalty is.