Can I Charge Interest on Overdue Rent in South Africa

One of the most frequently asked questions by landlords is whether they can legally charge interest on unpaid or overdue rent. The short answer is yes—but only under certain conditions that comply with South African law.

It’s not simply a matter of deciding on an interest rate and imposing it. Landlords need to understand the legal framework, include the right terms in their leases, and follow fair practices to ensure that any interest charge is enforceable.

This guide explains when and how landlords in South Africa can charge interest on overdue rent, the legal requirements, and best practices for avoiding disputes.

The Rental Housing Act on Overdue Rent

The Rental Housing Act allows landlords to recover unpaid rent. It explicitly recognises a landlord’s right to claim rent that is “due and payable” and to pursue unpaid rent through:

• The Rental Housing Tribunal, or
• An order of a court of law.

However, the Act itself does not automatically set an interest rate or grant the right to charge interest unless this is provided for in the lease agreement.

The Importance of a Written Lease Clause

If you want to charge interest on late rent payments, you must include an explicit clause in the lease agreement that:

• States the landlord’s right to charge interest on overdue rent.
• Specifies the interest rate to be charged.
• Describe how and when the interest will accrue (e.g., monthly, annually, daily).

Example of a simple clause:

“If the tenant fails to pay any rental amount by the due date, interest will accrue on the unpaid amount at a rate of 2% per month, calculated daily and payable on demand.”

Without this kind of clause, charging interest can be challenged as unfair or even unlawful.

What Interest Rate Can Be Charged?

South African law requires that any interest charged on overdue rent be reasonable and fair.

Key considerations:

• National Credit Act (NCA): This law sets maximum interest rates for credit agreements, but most residential lease agreements are not considered credit agreements under the NCA.
• Common Law and CPA: Even though the NCA may not apply, landlords cannot impose excessive or punitive rates.
• Reasonableness: A typical, fair rate is often in the range of 1–2% per month on arrears.

Charging an unreasonably high rate (e.g., 10% per month) could be challenged as an unfair practice under the Rental Housing Act or Consumer Protection Act (CPA).

The Consumer Protection Act (CPA) Impact

For fixed-term residential leases covered by the CPA:

• All material terms, including penalties or interest on late payments, must be disclosed upfront in the lease.
• Surprise charges that weren’t explained in the lease can be ruled unfair and unenforceable.
• Any penalty must be reasonable.

This ensures that tenants are aware of potential costs if they pay late.

Written Notice of Arrears

Before claiming interest or demanding payment of overdue rent, landlords should:

• Issue a written notice to the tenant specifying the amount in arrears.
• Reference the lease clause authorising interest.
• Clearly state the interest amount accruing and payment deadline.

This formal communication supports your claim and improves the chances of voluntary payment.

Enforcing Payment of Overdue Rent and Interest

If a tenant refuses to pay overdue rent (with interest, if applicable):

• Rental Housing Tribunal: A low-cost option to resolve disputes, obtain an order for payment, and enforce lease terms.
• Court action: For higher-value or contested claims, you may need to sue in court.
• Keep clear records of all demands, payments, notices, and the signed lease.

You cannot use self-help (e.g., changing locks) to enforce payment.

Best Practices for Charging Interest

To ensure your right to charge interest is lawful and enforceable:

• Include an explicit, fair interest clause in the lease.
• Specify the interest rate precisely.
• Explain the rate and calculation to tenants at the time of signing.
• Keep interest rates reasonable to avoid challenges at the Tribunal.
• Issue proper notices when rent is overdue.
• Document everything—notices, communications, payments.

Professional and transparent handling of late payments fosters trust and mitigates legal risk.

Risks of Not Following the Law

If a landlord charges interest without a valid lease clause or at an unreasonable rate:

• The tenant can refuse to pay the interest.
• The Rental Housing Tribunal may rule the charge as an unfair practice.
• A court may strike down the interest claim entirely.
• The landlord’s reputation may suffer.

By following the law and best practices, landlords can enforce their rights fairly and avoid these risks.

FAQs

Can I charge interest without a lease clause?

No. You need a written clause in the lease agreement. Without it, any interest charge may be unenforceable.

Is there a legal limit to the interest rate?

There’s no specific statutory cap for leases outside the NCA, but rates must be reasonable. Excessive rates can be ruled unfair.

Does the CPA allow interest on overdue rent?

Yes, but only if disclosed upfront in the lease and if the rate is reasonable.

How do I notify tenants of interest charges?

Provide an apparent, written demand specifying overdue amounts and applicable interest, referencing the lease clause.

Can the Rental Housing Tribunal enforce payment of interest?

Yes, if the lease authorizes interest and the rate is fair, the Tribunal can order payment of arrears with interest.

Useful External Links

• www.gov.za/documents/rental-housing-act
  Official government text of the Rental Housing Act.

• www.justice.gov.za
  Department of Justice – includes eviction and rental dispute processes.

• www.westerncape.gov.za/service/rental-housing-tribunal
  Example of a provincial tribunal page explaining dispute resolution.

• www.saflii.org
  Southern African Legal Information Institute – free access to landlord-tenant case law.