How much freedom does a Landlord have when it comes to allocating payments made by a Tenant? The answer of this question is mostly regulated by the lease agreement. Should the lease agreement be completely silent on the matter and rent is specified in the lease agreement, inclusive of utilities then any payment made by the Tenant will be allocated accordingly. Should rental be a specified amount, but utilities and any other services to the premises are excluded and will be charged at an agreed amount, but not as per the invoice from the service provider. In this case it would come down to the wording in the lease agreement should the lease agreement not address this position, the Landlord would be entitled to allocate any unspecified payment from the tenant to any of the amounts due.
Should the lease agreement however specify a rental amount, and utilities or other services will be invoiced to the tenant for reimbursement to the landlord, then payments can be allocated as the landlord please. However, should the lease agreement not allow the landlord to allocate payments as he deems fit and the tenant specifies his payment, indicating what he is paying for, for instance his reference on his payment is “Rental payment” then Landlord will have no choice but to allocate the payment accordingly. Should the landlord invoice the tenant specifically as the landlord is invoiced by the service providers or municipality and again is silent on the matter of allocation, in that case the same rule as above would apply, the tenant would be able to dictate how the payment should be allocated.
The easiest and best way for a landlord to avoid a situation like this would be to have a simple clause in the lease agreement that specifically states that the landlord would be entitled to allocate payments as he deems fit. Where the lease agreement is silent on this matter, this can be done by simply including the same sentence onto the rental invoice.
The reason why a landlord would want to have this freedom to allocate payments as he deems fit, is that in terms of the landlord hypothec items held on the premises can only be used as security in favour of the landlord for outstanding rental and not any other costs. As such, a tenant could be making payments only towards rent and if the landlord does not that have the right to allocate those payments to utilities, he could end up in a position where the rent is up to date, so the landlord cannot attach any items in terms of the landlord hypothec.