South Africa’s rental property market is experiencing notable growth, largely driven by buy-to-let investors looking to capitalise on stable rental demand and interest rate cuts.
According to PayProp Rental Indexes, the national average rent has risen by 45.8% over the past decade — most notably in high-demand areas such as the Western Cape, where the average monthly rental sits at around R11 141. This trend is likely to see discerning investors turn to rental property as an attractive asset in 2025.
Grant Smee, CEO of Only Realty Property Group, notes that property remains a sound investment that builds long-term wealth, but says it’s vital to protect this asset with a well-constructed lease agreement.
“The Rental Housing Act is in place to protect both tenants and landlords. The Act requires a clear, written lease agreement outlining the rights and obligations of both parties,” explains Smee. “Without this, landlords expose themselves to unnecessary risk, resulting in costly legal disputes. A handshake deal just doesn’t offer the protection landlords need, even if the tenant is a close friend or family member of the landlord.”
Understanding Landlord and Tenant Responsibilities
A lease agreement should define the responsibilities of both parties to avoid misunderstandings. The landlord is generally responsible for ensuring the property is habitable and maintained, dealing with structural repairs, and adhering to legal requirements for deposits and evictions. On the other hand, the tenant is expected to pay rent on time, maintain the property in good condition, and comply with the lease terms.
“When one party fails to meet their obligations, the lease serves as the legal basis for enforcing consequences. If a tenant defaults on their rental payment or damages the property, the landlord may proceed with legal action, ideally through the courts or the Rental Housing Tribunal,” he explains.
What to Include in a Lease Agreement
A comprehensive lease agreement sets clear expectations from the outset. Smee shares an overview of the key elements that need to be included in every lease agreement:
- Rent payment terms: Specify the amount of rent, any escalation clauses, the due date, and the accepted methods of payment. “This is important to prevent any confusion or disputes regarding payment.”
- The deposit terms: “Be sure to include the deposit amount, how it will be held and the conditions for its return, in line with the Rental Housing Act. The deposit must be invested in an interest-bearing account for which the tenants can request proof at any time. The deposit must be returned within a reasonable timeframe, minus any deductions for damages beyond normal wear and tear.”
- Maintenance and repairs: This clause must outline the landlord’s responsibility for maintenance and repairs, as well as the tenant’s obligation to report any issues promptly.
- Termination and notice periods: Clearly state the notice periods required for both parties to terminate the lease agreement.
- The lease duration: Outline whether this is a fixed-term or month-to-month lease, as well as any rules regarding sub-letting and short-term rentals.
“We often see issues arise when subletting or short-term letting is not addressed,” Smee notes. “To avoid this, landlords should stipulate whether services like Airbnb are allowed. In most cases, it’s best to prohibit short-term subletting without prior consent, as it can increase risks and complicate insurance claims.”
Smee adds that if the landlord does, however, have agreed to this term, then it needs to be brought forward to the body corporate prior to providing formal consent.
DIY Free Lease Templates vs Professional Drafting
Looking for a simple and cost-effective solution, many landlords are choosing to download free lease agreement templates online. While these agreements are often legally binding, they can lack the specifics required to comply with South African legislation, such as the Consumer Protection Act (CPA) and the Prevention of Illegal Eviction from and Unlawful Occupation of Property Act (PIE).
Smee notes, “Free templates are typically generic and may not be tailored to the unique circumstances or South African laws. While they offer a basic framework, they often don’t cover specific scenarios that can lead to disputes, so a lease agreement should be drafted by a professional - either an estate agent or a property attorney. Professional leases simply offer a higher level of legal certainty and are more likely to stand up in court.”
Why Screening Tenants is Important
“Drafting a strong lease is important, but landlords cannot overlook the necessity of tenant screening - whether they’re leasing to a new tenant or renewing an existing lease,” Smee advises. “When renewing a lease, don’t assume the tenant’s circumstances are the same. Reassessing affordability and reviewing past behaviour can help you avoid future issues.”
Tips for tenant screening include:
- Credit checks to confirm the tenant’s current financial standing.
- Employment verification to ensure a consistent income.
- Rental history checks to gauge reliability in previous leases.
Protect Your Property Investment
With projections indicating the ongoing growth of South Africa’s rental market, Smee encourages property owners to ensure lease agreements are drafted or reviewed by a professional to ensure clarity, legal compliance, and peace of mind.
“A lease is more than just a piece of paper,” concludes Smee. “It’s a contract that protects your investment and ensures a smooth relationship with your tenant. Taking the time to get it right is always worth it.”
Grant Smee, CEO of Only Realty Property Group