Rental Housing Bill: discussion

PUBLIC SERVICES SELECT COMMITTEE
27 October 1999
RENTAL HOUSING BILL [B29-99]: MANDATES

Documents handed out
Negotiating Mandates on [B 29-99] from provincial legislatures:
Eastern Cape
Free State
Gauteng
Kwa-Zulu Natal
North West

MINUTES
Five provinces submitted their negotiating mandates on the Bill. All the provinces supported the Bill, excluding Western Cape province, who abstained.

Appendix:
Reports on the negotiating mandate on the Rental Housing Bill [B29-99] (Section 76(1) Bill)

Eastern Cape Provincial Legislature
Consideration
The committee found nothing controversial on the Bill.

Resolution
The committee resolved that the following mandate be conferred:
-To support the Bill without amendments,
-Permanent Delegates be designated to attend the interprovincial negotiation meeting on the Bill.

Free State Provincial Legislature
Briefing
On 27 October 1999, Adv. J. Machaka, Assistant Legal Advisor of the Free State Legislature briefed the Committee on the legal substance and effects of the Bill.
Mr.L.Tsenoli, MEC for Local Government and Housing, Free State Province briefed the Committee on the political implications of the Bill.

The Committee was informed that the Bill makes provision for the definition of the responsibility of Government in respect of rental housing property, makes provision also for the following: Creation of the mechanisms to promote the provision of rental housing property, proper functioning of the rental housing market and also to facilitate sound relations between tenants and landlords and finally repeal the Rent Control Act, 1976.

Consultation
The Committee considered the scope of consultation on the Bill and resolved not to conduct public inputs due to time constraints.

Consideration
The Committee considered the Bill, inputs and information received.

The Committee supports the Bill with the insertion of the following amendments:

Chapter 4 (7)
The clause should have openness so as to not reduce it to few people.

Chapter 4 (9)
A provision be made as insertion to subclause 3 that it entails that members of the tribunal as contemplated in subclauses 1and 2 must be appointed in accordance with the principle of transparency and representivity.

Chapter 5, page 22
On page 22, Section 17 to read thus: without prejudice to the constitutional right of any person to gain access to a court of law, the proceedings of a Tribunal may be brought under review and appeal before the High Court within its area of jurisdiction.

Chapter 4 (10)
On page 14 (5) to read thus: The quorum of any meeting of the tribunal is three members of the tribunal present at that meeting.

Resolutions
The Committee resolved that:

The following mandate be conferred:
To support the Bill with the insertion of the above amendments.

2. Mr T.Marais and Ms S.Botha be designated as Permanent Delegates to attend the interprovincial negotiation.

Gauteng Provincial Legislature
INTRODUCTION
The Speaker referred the Rental Housing Bill [B29-99] to the Housing Committee. A briefing was given on the Bill to the Standing Committee by officials from the national Department of Housing. There were no public hearings on the Bill.

IMPLICATIONS OF THE BILL FOR THE PROVINCE
There will be no cost implications for the Province when the Bill is implemented.

NEGOTIATING POSITIONS ADOPTED BY THE COMMITTEE
The Committee recommends the following amendments to the Bill:

Section 2(1)(a)
The words 'among persons historically disadvantaged by unfair discrimination and poor persons' should be deleted.

Section 4
The general provisions in Section 4 relate only to the protection of tenants. No similar clause regarding the rights of the landlord appears in the bill.

Section 4(1)
The words 'in respect of a dwelling' should be deleted.

Section 5(3)(a)
The words 'any payment' in the first line should be substituted by 'all payments' and what follows thereafter in this subsection should be deleted.

Section 5(3)(d)
The paragraph provides that interest must be paid to a tenant on any deposit received. Currently, in terms of the Estate Agents Act, half the interest earned on Trust Funds invested by an estate agent must be paid to the Estate Agents Board Fidelity Fund. This fund is utilised to protect members of the public from fraud or any other misdemeanours by an Estate Agent.

In term of the Act, should such interest on a tenant's deposit now be required to be paid to the tenant, this would have a negative impact on the Estate Agents Board Fidelity Fund and would reduce the protection that the Board currently offers the public.

A proposed solution to this situation may well be to amend the Act so as to provide that the requirement of this clause would only apply to persons or bodies not registered with the Estate Agents Board.

Section 5(3)(e)
The words 'before moving into the dwelling' should be substituted by 'before the tenant moves into the dwelling'.

Section 5(3)(f)
The words 'or at a mutually convenient time' should be inserted after 'such expiration'.

Section 5(3)(g)
The word 'restoration' should be substituted with the word 'vacation'.

Section 5(3)(m)
Different periods are provided within which the deposit or the balance thereof must be refunded to the tenants. This can cause administrative burdens and unnecessary costs that will ultimately be passed onto the tenant.

Section 13(l)
'Unfair practice' is not defined and should be defined.
Section 13(5)(b)
A 'realistic return on investment' should be described in the bill itself.

Section 15(l)(f)(xi)
When one includes 'leases', those regulations will contain substantive law, which should not be prescribed.

PRINCIPLE OF THE BILL
The Committee supports the principle of the Bill.

Kwa-Zulu Natal Provincial Legislature
RESOLUTION
Supports the Bill, subject to the following amendments:
2.1 Definitions
(a) 'head of department' means the official in charge of a department of the provincial administration responsible for housing in the province.

(b) delete the definition of 'Gazette' as this is defined in the Interpretation Act.

(c) In the definition of 'lease', delete the words 'and to lease has a corresponding meaning' as the connotative meaning is inferred.

(d) In the definition of 'MEC' substitute the word 'a' with the word 'that' before the words 'province in question' and delete the words 'in question'.

(e) In the last part of the definition of "dwelling" the phrase "which is leased as part of the lease" does not make sense. It is submitted that this phrase should be amended to read:

"which is leased as part of the leased premises"

2.2 Clause 4(4)
The term "genuine visitors" must be defined in clause 1 of the Bill, so that the vagueness of this term does not allow for unnecessary litigation.

2.3 Clause 5(l)
It is submitted that clause 5(1) and 5(2) should be substituted with the following clause:

"A lease between a tenant and a landlord must be reduced to writing."

Due to problems related to verbal lease agreements and the difficulty in proving their content in a court of law, it is submitted that lease greements between landlords and tenants should be in writing. Furthermore, clauses 5(7) and (8) presupposes that a written lease exists for these annexures to be attached. Provision must also be made for a waiver of the stamp duty in respect of these leases. The standard provisions to be included in lease agreements contained in clause 13 should be prescribed in regulations by way of a Schedule setting out a standard lease agreement, so that a certain degree of uniformity can be maintained.

It is also submitted that if the Committee accepts this amendment then the requirement for all rental housing leases to be in writing must be extensively publicised.

ALTERNATIVELY,

If the Committee does not accept the amendment set out above then clause 5.8 must be amended to read that the House Rules shall be deemed to be annexed to the lease. Further a solution must be sought on how it is possible to attach a list of defects to a verbal lease since clause 5(9) states that clause 5(7) and 5(8) must be applicable to all leases.

2.4 Clause 5(3)
2.4.1 Substitute clause 5(3)(d) with the following:
"the deposit contemplated in paragraph (c) must be invested by the landlord in a separate interest bearing account with a financial institution and the account must be opened specifically for the purposes of investing the deposit"

2.4.2 Insert a new paragraph to read:
"The landlord must, subject to paragraph (g), pay the tenant interest at the rate applicable to the account contemplated in paragraph (d), which may not be less than the rate applicable to a savings account with a financial institution. The tenant may at any time request the landlord to provide the him or her with a financial statement in respect of the account and the landlord must provide the statement on request."

It is submitted that a tenant's deposit must be deposited into a separate bank account especially for this purpose, and not be mixed with other accounts or the landlord's assets. The tenant should have the right to information pertaining to that account at any time.

2.4.3 As a consequence of the above insert a definition of "financial institution" as is set out in the Banks Act.

2.4.4 Insert a new paragraph in clause 5(3) to read as follows:

"If there is a breach of the lease, the aggrieved party must notify the defaulting party in writing to remedy the breach within a period of 7 days."

2.5 Clause 5(8)
It is submitted that the term "House Rules" in this provision should be defined in clause 1 of the Bill, and worded in line with section 35(2) of the Section Titles Act, 1986 which states that:

"Rules" in relation to a building or buildings which has or have been divided into a section or sections and common property, means the management rules and conduct rules for the control, management, administration, use and enjoyment of the sections and common property."

2.6 Clause 7
Provision must be made to compel the MEC to set up at least one Rental Tribunal and to enable him or her to set up more than one Tribunal.

2.7 Clause 9
It is submitted that since:

In terms of clause 13(13) of this Bill, the ruling of the Tribunal is "deemed to be an order of a magistrate's court in terms of the Magistrates Court Act...";

the Tribunal in determining whether an unfair practice exists

must have, in terms of sub-clauses 13(6)(b) and 13(6)(c), regard to "the common law to the extent that it does not constitute an unfair practice" and "the provisions of any lease to the extent that it does not constitute an unfair practice"; and,

if, any person fails to comply to the ruling of the Tribunal in terms of clause 13(4), or fails to comply with a request of the Tribunal in terms of sub-clauses 1 3(3)(a), (b) (c), (d) (e) or (f)

may in terms of clause 16 be "guilty of an offence and liable on conviction to a fine or imprisonment not exceeding two years or both such fine and such imprisonment."

that the Chairperson and at least one other member of the Tribunal should have appropriate legal qualifications.

The suggested amended wording is reflected in the comments for clause 9(1)(a) below.

2.8 Clause 9(l)
It is submitted that this provision which allows the MEC to a point a chairperson is far too subjective and lacks transparency. The provisions dealing with the appointment of the Tribunal should be brought in line with the provisions dealing with the appointment of members of the South African Housing Development Board in the National Housing Act, 1997.

Further, it is submitted that the category of "expertise in consumer matters" is too general, and should be limited to "consumer matters pertaining to rental housing". Accordingly clause 9(1) should be substituted with the with the clause set out below, a new clause 9(2) should be inserted as provided for below and consequential re-numbering of the existing sub-clauses of clause 9 must be effected.

Thus, the wording of this clause should be amended as follows:

"Composition

9. (1) The Tribunal consists of not less than three, and not more than five members, and must comprise -

(a) a chairperson, appointed in accordance with subsection (2) who must -

(i) be afit and proper person;

(ii) have knowledge, qualifications experience in the field ol' law; and,

(iii)have expertise in either property management or consumer matters pertaining to rental housing; and,

(b)) not less than two and not more than four members, appointed in accordance with subsection (2), in equal number, of whom -

(i) not more than fifty percent of the members shall be persons with expertise in property management;

(ii) not more than fifty percent of the members shall be persons with expertise in consumer matters pertaining to rental housing;

(iii) all must be fit and proper persons; and,

(iv) at least one member appointed in terms of paragraph (i) or (ii) must have knowledge, qualifications and experience in the field of law.

(2) The chairperson and members of the Tribunal must be appointed only after -

(a) the MEC has through the media and by notice in the Gazette invited nominations of persons as candidates for the respective positions on the Tribunal; and,

(b)) the MEC has consulted with the respective Portfolio Committee of the Provincial Legislature which is responsible for housing matters in the Province.

2.9 Clause 9(4)(a)
It is submitted that this clause must be subject to the same appointment stipulations as reflected in the amended clause 9(2) above, and that the filling of a vacancy in the Tribunal should be done in a limited time frame, which should not be longer than 60 days.

2.10 Clause 10(5)
Provide for the quorum to include at least one member appointed in terms of subsection 9(1)(b)(i) and 9(b)(ii) or their alternates. This will ensure that there is a reflection of a fair balance in the findings of the Tribunal.

2.11 Clause 10(9)
It is submitted that clause 10(9), as it appeared in B29-99 must be retained.

2.12 Clause 11(2)
It is submitted that provision should be made in the regulations for the appropriate qualifications and expertise pertaining to mediators, technical advisors and inspectors.

2.13 Clause 12(3)
Provision should be made for a date by which the annual report must be submitted to the MEC. It is submitted that the clause be substituted with the following:

"A annual report on the activities of the Tribunal must be submitted by the chairperson of the Tribunal to the MEC as soon as possible after, but within four months of 31 March in each year."

2.14 Clause 13
Where a landlord deducts the costs for either repairing damage to the dwelling or replacing lost keys as provided for in clause 5(3)(g), a tenant who may feel aggrieved by this action or who questions the reasonableness thereof, should be entitled to approach the Tribunal for relief. This may be implied in the Bill if the Tribunal rules that such action on the part of the landlord is an unfair practice, or if it is identified as unfair practice in terms of the regulations, but it is submitted that, for the sake of clarity, specific reference should be made for this eventuality in the Bill.

2.15 Clause 13(3)
Provide for the Tribunal to administer the oath or affirmation to those persons referred to in paragraph (c), (d) and (e) as well.

2.16 Clause 13(7)
A technical re-alignment of the words 'until the Tribunal has made a ruling ... the earlier.", needs to be effected for it to be applicable to paragraph (a); (b) and (c).

2.17 Clause 13(7)(c)
It is submitted that the time period for the Tribunal to make a ruling should be limited to 60 days.

Provision should be made in this clause for the imposition of a penalty by a MEC against a Tribunal which unreasonably fails to perform its functions within the stipulated time frame.

2.18 Clause 14
Insert the word 'to' at the beginning of paragraph (b); (c); (d) and (e).

This is a grammatical, drafting suggestion.

2.19 Clause 15(1)
In accordance with open and transparent governance, it is submitted that the preamble to the clause should be substituted with the following:

"The MEC may, after consultation with the relevant parliamentary committee of the Provincial Legislature responsible for housing matters in the Province, by notice in the Gazette, make regulations relating to..."

2.20 Clause 19(1)
Substitute the word 'subsection' with the word 'section' and delete the brackets around the number 18.

and any further amendments, providing that :
a) such amendment/s do not alter the essential elements of the Bill and;
b) consensus is reached on such proposed amendment/s by the KwaZulu-Natal delegates attending the Select Committee negotiating on the bill;

In the event the proviso not being complied with, the proposed amendment/s must be referred to the Provincial Standing Committee on the NCOP for decision.

North West Provincial Legislature
Consideration
There was no need for public hearings and thus none were held.

Resolution
The committee has considered the bill, and resolved to support the essence and principles of the bill.

Democratic Party Comment
It appears that the major thrust of the Act is to curtail undesirable activities that we know are taking place amongst persons historically disadvantaged by unfair discrimination. However, in order to control this situation, due consideration has not been given to the difficulties that could be encountered in conforming with the requirements of the Act by responsible and large property Management companies.

Whilst the Democratic Party recognises the need for this type of legislation, and particularly in light of the fact that a similar act was passed in this province, we have to express the following reservations and amendments:

1. The Bill, in section 6, recognises provincial competence. It provides that Chapter 4, dealing with tribunals, only applies to a province if that province has not enacted legislation dealing with the matters in that Chapter. Gauteng, for instance, already has its own Residential Landlord and Tenant Act (Act 3/1997)

Already there is an anomaly. Section 16 deals with offences and penalties and almost all prescribe penalties for failures etc. in terms of Section 13. In terms of Section 6, Section 13 will not necessarily apply to all provinces, and certainly not to Gauteng. How then will the penalties be determined for Gauteng?

2. Section 13 appears to be neutral but it can be employed to penalise landlords. For example, complaints may be lodged on the basis of an "unfair practise". What that is still has to be determined and will be prescribed by regulation. If a tribunal finds that such a practise exists, it may make a determination regarding the amount of rental to be paid. Such determination has to be made "in a manner that is just and equitable to both tenant and landlord" and account has to be taken of certain listed prescriptions, inter alia, norms and standards and other measures introduced by the Minister in terms of a policy framework. That framework still has to be produced!

3. The general provisions in Section 4 relate only to the protection of tenants. No similar clause regarding the rights of the landlord appears in the bill.

Section 2(1)(a)
The words "among persons historically disadvantaged by unfair discrimination and poor persons" can be deleted. Except for the fact that "poor persons" is not defined, the deletion of the abovementioned words gives government an even greater flexibility to provide affordable rental housing and, of course, administratively the historically disadvantaged and low-income persons (an expression used in Section 3(1)) will be assisted.

Section 4(1)
Reference is made to "a lease in respect of a dwelling". The words "in respect of a dwelling" can be deleted because the concept of a "lease" is defined with reference to a dwelling in Section 1, definitions.

Section 5(3)(a)
The reference to "any payment" in the first line can be substituted by "all payments" and what follows thereafter in this subsection can be deleted because the fact that the receipt has to stipulate the purpose for which the payment was made is fully covered in sub-section 5(3)(b).

Section 5(3)(d)
The paragraph provides that interest must be paid to a tenant on any deposit received. Currently, in terms of the Estate Agents Act, half the interest earned on Trust Funds invested by an Estate Agent must be paid to the Estate Agents Board Fidelity Fund. This fund is utilised to protect members of the public from fraud or any other misdemeanors by an Estate Agent.
In term of the Act, should such interest on tenant's deposits now be required to be paid to the tenant, this would have a negative impact on the Estate Agents Board Fidelity Fund and would reduce the protection that the Board currently offers the public.
A proposed solution to this situation may well be to amend the Act so as to provide that the requirement of this clause would only apply to persons or bodies not registered with the Estate Agents Board.

Section 5(3)(e)
The landlord and tenant do not intend both moving into the dwelling. Therefore, the words "before moving into the dwelling" should be substituted by "before the tenant moves into the dwelling".

Section 5(3)(f)
It is important that the required inspection takes place as close as possible to the last day of occupation. Therefore the words "or at a mutually convenient time" should be inserted after "such expiration".

Section 5(3)(g)
The word "restoration" can be substituted with the word "vacation" which is used later in the section.

Section 5(3)(m)
Different periods are provided within which the deposit or the balance thereof must be refunded to the tenants. This can cause administrative burdens and unnecessary costs that will ultimately be passed onto the tenant.

Section 13(1)
"Unfair practise " is not defined. The regulations are still to be prescribed and one assumes that it will indicate what the legislatures had in mind.

Section 13(5)(b)
A "realistic return on investment" should be described in the law itself. Leaves it open to interpretation.

Section 15(1)(f)(xi)
This is one of the sub-sections indicating what the regulations regarding unfair practises should contain. Matters such as deposits, receipts, etc. are matters capable of being prescribed. When one includes "leases", however, those regulations will contain substantive law, which should not be prescribed. In cases where substantive law is prescribed it means that the act does not say what the law is - the MEC will by regulation say what the law is. That is unacceptable.