Are ‘administration fees’ enforceable in South African rental law?

As a property practitioner, your role in the rental market is pivotal. You are the bridge between landlords and tenants, ensuring that both parties’ interests are protected within the bounds of the law. However, recent questions from the industry highlight a growing concern – the inclusion of certain clauses in lease agreements that may not hold up in court or before the Rental Housing Tribunal. Specifically, the ‘administration fee’ often charged to tenants.

Administration fees – a legal pitfall

Many landlords and property practitioners wonder if it’s permissible to include a clause in the lease agreement that requires tenants to pay an administration fee or charge. While it’s understandable that property practitioners want to ensure their business sustainability and fair compensation for their work, it’s important to tread carefully here.

The core issue lies in the nature of the mandate agreement. The landlord, who engages the property practitioner, is already paying a commission for services like tenant procurement, vetting, lease negotiation, and management. These tasks are part and parcel of the commission and should not be charged again to the tenant. Essentially, adding an administration fee on top of this could be seen as an unfair practice.

In South Africa, freedom of contract allows parties to agree on almost anything within a lease agreement. However, this freedom is not absolute. Contracts must align with legal principles and moral standards. Charging an administration fee to a tenant, especially when those administrative actions are already covered by the landlord’s commission, does not meet these criteria.

Both the Rental Housing Tribunal and the courts have indicated that such clauses are unlikely to be enforceable. Including an administration fee could lead to disputes, leaving landlords and property practitioners in a precarious legal position.

Inspection fees – a justifiable charge

In contrast, the issue of inspection fees – covering entry and exit inspections – presents a different scenario. These inspections are often outsourced, necessary under the Rental Housing Act, and not typically covered by the property practitioner’s commission. Recording a set amount for these inspections in the lease agreement can be beneficial. It provides clarity for both parties, ensuring the tenant isn’t blindsided by unexpected costs.

Including a clause about inspection fees not only makes the lease agreement more transparent but also protects the tenant’s interests by ensuring that inspections are conducted professionally. This practice can foster trust and reduce potential disputes.

Stay protected with a lease that is consistently tested in court

As the rental market gets more and more complex to navigate, ensuring that your lease agreements are legally sound and enforceable is crucial. The TPN Residential LeasePack, South Africa’s most widely used lease agreement, is also the most rigorously tested in courts and at tribunals. As a result, you can trust that every clause, including those related to administration and inspection fees, is supported by established legal precedent.

In the latest update to the LeasePack, we have made provision for you to charge incoming and outgoing inspection fees. Download the latest version of the Residential LeasePack here.

Read the SSLR Inc. Memorandum on Administration Fees, here.