Can Your Landlord Charge a Penalty fee for Late Payments?

It’s no secret that many South Africans are feeling financial pressures as a result of the global pandemic that continues to put strain on our economy. With many people losing their jobs, or simply not being able to earn the same income they once were, many tenants are not able to make their rental payments on time. 

This leads us to the question about whether or not landlords can charge tenants a penalty for late rental payments. When it comes to residential leases, late payment penalties are prohibited in terms of the Rental Housing Act 50 of 1999, Section 3(c)(i) of the Unfair Practices Regulations, which states that a lease agreement cannot include a provision which imposes a penalty for late payment of rent whether or not the penalty takes the form of an administrative charge or any other form other than interest.

A lessor can not charge an admin/penalty fee for late payment but can charge interest on the late payment. (Please note that this applies to residential leases, and late payment penalties are allowed in commercial/retail leases). 

Therefore, tenants are entitled to demand that their landlords remove such late payment penalties from their invoices. 

Here’s what we recommend landlords do when dealing with late paying tenants:

  • First things first, contact the tenant to query the late payment. If the tenant expresses a problem and asks for an extension, our advice is to work with the tenant to reach an agreement. We are all feeling the pressure, so a little kindness can go a long way.
  • If the tenant still does not pay the rental on the agreed upon date, the landlord should send a written breach of contract letter which gives the tenants seven (unless otherwise stipulated in the lease agreement) days to pay the outstanding amount. The letter should also inform the tenant of the landlord’s intention to report the payment default to the credit bureau in the event that the payment is not made. This can be done 20 days after the letter is received by the tenant.
  • If the tenant fails to make the payment within seven days of receiving the breach of contract, the landlord must ensure that the tenant receives a written notice to cancel the lease agreement. This letter must indicate that the tenant must vacate the property immediately.
  • If the tenant fails to leave the property, the landlord will need to seek legal assistance in order to proceed with an eviction order. 

For more information on any of the above, please feel free to contact us.