Wednesday, August 21, 2013

Money-hungry landlords fleece tenants of their deposit refunds

A furnished apartment in Nairobi. Money-hungry landlords are fleecing tenants of their deposit refunds.

A furnished apartment in Nairobi. Money-hungry landlords are fleecing tenants of their deposit refunds. 

By KIARIE NJOROGE [email protected]

When Victoria Mwangi moved out of the house she had lived in for two years in Lang’ata last year, she expected an immediate refund of her rent deposit, but to date she has not received a cent.

At first she was told that the house was still vacant, and although she says she did not understand how this was relevant to her case, she waited.

Next came another tale; that the landlord lives abroad and only comes to the country once a year. She was told that he will be around at the beginning of this year, but this came and passed too.

The last time she asked about the deposit from the caretaker, she says he was verbally abusive and told her that they do not refund deposits.

This scenario is typical of many such situations in Nairobi where landlords, who are now demanding up to three months’ advance rent, refuse to refund the amount, citing the need for repairs. While for some landlords this is genuine, most are simply pocketing the money and the next innocent tenant moves into the same trap.

Mr Edwin Gitau, the managing director of real estate agency SEB Estates, however, lays the blame on tenants who sign lease agreements without properly reading them.

Most lease agreements have a clause indicating that after the tenant moves out, the deposit may be used to restore the house to the state it was at the time of moving in, a clause most tenants ignore.

“The lessee shall leave all fixtures and fittings, internal walls, iron, wood, or other internal parts of the said premises in the same good condition as at the commencement of this lease,” reads a standard SEB lease agreement.

For this reason, Mr Gitau advises tenants to sign lease agreements only after inspecting the house’s condition.

“The tenant should take an inventory of the house’s fixtures and fittings together with the agent, who should co-sign the documents,” he says. “If possible, one should even take pictures. This will ensure that items that may be broken will not be pinned on you.”

During the termination of the tenancy, one is also advised to do an inventory with the agent as this can guide in deciding the amount to be used for repairs, the balance of which should be refunded.

But even with all these safeguards, unscrupulous landlords still find a way to retain the money. The clause on retaining the house in its original condition, which is borrowed from the Rent Restriction Act, is open to varying interpretation.

For the most part, this refers to repainting the house, but landlords insist on using their “professional” labour and “high quality paint”, both of which inflate the cost, leaving nothing to be refunded.

Commercial lawyer Steven Nzaku, however, says the law does not give landlords the unilateral powers to utilise their tenants’ deposit for repairs.

“The responsibility of repairs lies with the tenant. The landlord may move to the Rent Restriction Tribunal to obtain authority to utilise the deposit for repairs in case the tenant refuses to do so,” he adds.

With legal recourse likely to take a lot of time and energy, most people choose to just move on, providing unscrupulous landlords with a cash cow. In some cases, landlords do not even have tenancy agreements and the tenant has no basis to demand the refund.

Most tenants also remain ignorant of the relevant laws — like the Rent Restriction Act that, for example, caps the maximum advance rent at two months.

The Act also establishes a Rent Restriction Tribunal under the ministry responsible for housing through which tenants and landlords can apply to have their grievances heard.

What the law says

Increasing rent: A landlord shall not increase the rent charged to a tenant for a rented premise without giving the tenant at least 90 days’ written notice of intention to do so. The notice shall be in a prescribed form and must set out the landlord’s intention to increase the rent and the amount of the new rent. An increase in rent, therefore, is void if the landlord has not given the notice required by law.

Reason for rent increase: A landlord may increase rent if he or she has carried out or undertakes to carry out a specified capital expenditure in exchange for the rent increase, has provided or undertakes to provide a new or additional service in exchange for the rent increase, or has taken into account inflationary trends in the economy.

For purposes of this section, capital expenditure is eligible if it is necessary to protect or restore the physical integrity of the rented premises, maintain the provision of a plumbing, electrical, ventilation or air conditioning system, provides access to persons with disabilities, promote energy or water conservation, or maintains or improves the security of the premises or part of it.

An increase based on inflation must be based on the percentage change from year to year in the Consumer Price Index for prices of goods and services as reported monthly by the Kenya National Bureau of Statistics, averaged over the 12-month period that ends at the end of December of the previous calendar year and rounded to the first decimal point.

Decreasing rent: This rarely happens in Kenya, but a landlord should decrease the rent charged to a tenant if the landlord ceases to provide any prescribed service with respect to the tenant’s occupancy of the rental premises, including satellite TV, water services, and garbage collection. The decrease, however, must be proportionate to the decrease of the services.

Appointment of management agents: Whenever a landlord appoints an agent for the purposes of effecting transactions relating to a tenancy, the particulars and the scope of such agency must be in writing and must be made available to the tenant.

Source: www.kenyalaw.org

Deposit, viewing... and now commitment fees

SHE WAS DETERMINED TO MOVE HOUSES IN late July, but Nairobi resident Nancy Onyango shelved the idea after finding letting agent’s fees untenable.

Through a friend, Onyango had identified a suitable house in the South B area which fit her interests and she was keen to move in. Her friend linked her to a letting agent, who scheduled a meeting with Onyango so that she could go and view the house.

Eager to move from Buru Buru on the east of the capital, Onyango went to the agent’s office in South B, where the meeting was to take place.

The meeting went well, with the agent telling her the qualities of the house. Onyango was impressed... until the agent told her the amount of money she was to part with.

“I was to pay one month’s rent and a similar amount as deposit, which totalled Sh60,000. And then he said there was commitment fee which was half a month’s rent and “viewing” fees of Sh5,000,” she recounted.

The rent and deposit was to be banked in an account she was to be given, but the commitment and “viewing” fees were to be given to the agent in cash. All the money was to be paid upfront.

“I had no problem with the rent and deposit, but I found the ‘commitment fees’ ridiculous and the ‘viewing’ charges too high. I could not take it,” said Onyango.

Her predicament represents the plight of many tenants in Kenya who are grappling with high housing agents’ charges. The letting agents, in a bid to cash in on the high demand for houses, have raised their fees and introduced charges like “commitment fee”. 

“It was the first time I had come across commitment fees. I asked him to explain what the fee was about and he said it was to show my seriousness to move into the house and stay there for some time,” said Onyango.

The telecoms worker, similarly, had expected to pay “viewing fees” of not more than Sh1,500. The charges shocked her.

“Why pay all that much when what the agent does is open the house and let you see it? That was a rip off,” she concluded. 

Onyango now believes the high charges are the reason the house had remained vacant for many months. “My friend informed me the house had been vacant for over two months. I told her my predicament and she concluded that was the reason it was vacant,” she said.

However, letting agents defended the high “viewing” charges and commitment fees, a payment that is being adopted by many of them, especially in high and middle-income estates. “We raised our fees to deter ‘jokers’ who were coming to waste our time. Some people come and you take them to the house but they end up not renting it. It becomes a waste of effort,” noted Bernard Ngunjiri, a property agent in Kayole on the east of the capital.

While Ngunjiri, who charges viewing fees of Sh1,100, has heard about commitment fees, he has not started charging it. “I know my colleagues are charging the fee, but I cannot do it here because most of my clients are low-income earners. I would be happy to start doing it since some tenants can be disruptive,” he said.

Ngunjiri noted that commitment fees force a tenant to stay in the house for at least three months. “Agents introduced this as a means of avoiding tenants who stayed for only a month, taking the agent back to zero,” he said, adding that the deposit protects the landlord while commitment fees shield the agent.

However, he could not explain why it is the agent who collects the fees and not the landlord. Most property owners do not know that agents are making a killing on their houses by introducing such fees.

“My house has stayed empty for about four months. The agent told me he has not found a serious tenant. I did not understand, but perhaps it is time I found out if he is charging commitment fees,” said Patrick Muthei, who has a house in Komarock.

Muthei said if he finds out that the agent is charging the fees, he will fire him. “There is absolutely no reason to engage an agent who seeks to make a killing on a property he has no idea how one acquired. The commitment fee is unnecessary,” he said. 

While some letting agents demand commitment fees equal to half a month’s rent, others want a full month’s payment. “I went to check on a house in South C and an agent told me to pay commitment fees of a month’s rent on top of rent, deposit, and ‘viewing’ fee of Sh3,500. I gave up and moved to an estate along Thika Road,” recounted Ann Bahati.

Antony Kuyo, a real estate consultant, blames the high and unnecessary charges by letting agents on lack of regulations.  “The real estate industry is growing rapidly but it is uncoordinated. Letting agents are cashing in on loopholes to exploit tenants because they know that no law prohibits them. It is high time such practices were eradicated to protect consumers,” he said.  (Xinhua)

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