South Africa is seeing a “slow relaxation” of Covid-19 lockdown restrictions related to the residential property market, but this “still comes as good news”, says Michelle Dickens, managing director of TPN Credit Bureau.
Her comments follow the latest lockdown directions released on May 7 by Cooperative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma, allowing for limited circumstances where tenants and homeowners can move or relocate during Level 4 lockdown. This can be done until June 7.
“It’s important that we don’t have mass movement … so, what has happened is that we’ve had slow and deliberate allocation to who may move,” she tells Moneyweb.
“As of May 7, new directions were released which give effect to limited circumstances where tenants and homeowners can move or relocate in terms of new lease agreements or in terms of immovable property that was transferred,” she explains.
Dickens, who is co-founder of TPN and is also a non-executive director of Transcend Residential Property Fund, adds that the “limited circumstances” referred to in the updated regulations are related only to new lease agreements that were entered into prior to or during lockdown, or where immovable property was transferred prior to lockdown.
“The lockdown is defined in terms of the regulations,” she says, adding that this means tenants can move if their lease agreement was entered into before April 30, or if their immovable property was transferred prior to March 26.
Asked about tenants who now cannot afford to pay rent due to loss of income as a result of the lockdown, Dickens notes that this is one of the most frustrating dilemmas for numerous tenants as well as landlords.
“Many tenants are faced with a loss of earnings or limited earnings,” she says, adding that TPN has advocated the use of tenant income declaration documents, where tenants can declare what their circumstances are in terms of their loss of income.
“They must provide supporting documentation to prove the loss of income and they must also allow the landlord to contact their employer to confirm the loss of income,” she stresses.
“In these circumstances, where income has been lost, the tenant can then enter into a deposit utilisation or deferment agreement.
“What this effectively means is that tenant and landlord must both agree that the deposit can be used for the rent. The tenant further agrees that the deposit will be topped up, over a period of time, once the tenant is back in a position of earning income again,” she adds.
Dickens points out that the deposit utilisation option provides immediate cash flow for the landlord.
Likewise, in relation to the deferment of a rent option, she says the tenant and landlord could enter into an agreement that stipulates rental will be deffered for the lockdown period. “However, once the tenant is back in a position of earning again, they will reinstate or repay the deferred rent in instalment repayments.”
“This provides some relief for tenants in the short term, but what it does mean when they are back to earning again, is that they will be required to pay the rent in the ordinary course on a monthly basis, plus the catch-up of instalments in terms of the deposit or the deferred a rent,” she notes.
Andrew Schaefer, managing director of national property management company Trafalgar, shares similar sentiments on options available to tenants and landlords due to the impact of the lockdown.
“Landlords also need to know what options are open to them if tenants lose their income due to the lockdown or the economic effects of the Covid-19 pandemic,” he says
“If they are quality tenants who have previously always paid their rent in full and on time, we would suggest that they be asked to sign a waiver to the effect that their deposit may be used as rent for a certain time instead of it having to be held in trust,” he points out.
“It would be best if this agreement were drawn up by a professional rental agent… It should also contain a provision that the deposit is to be re-instated, perhaps in instalments, by a certain date, and that the landlord will be able take legal action if the tenant reneges on this arrangement,” he advises.
Schaefer says alternatively landlords may decide to give good tenants a “payment holiday” during the lockdown or even for the next couple of months, especially if they have been given a similar indulgence by their bank on their bond instalments.
“However, they do need to proceed with caution and make sure there is a written agreement in place that provides for them to withdraw the indulgence under certain circumstances; for the unpaid rent to also be re-instated before the end of the lease; and, for them to be able to take legal action if the tenant reneges on the special arrangement,” he adds.
The rules on evictions
Meanwhile, with regards to residential evictions, Dickens says that the initial hard lockdown effectively prohibited evictions. However, in terms of lockdown Level 4 and the new disaster management regulations that were released on April 29, as of May 1, landlords can now apply to court to get an eviction order.
“The courts may grant the eviction order; however, the restriction is that the eviction order may not be executed on until the end of alert Level 4,” she points out.
“This means the tenant remains in the property and the sheriff will only be able to evict the tenant once we [have] reached the end of alert Level 4.”
Source: Moneyweb (emphasis by SD LAW*)
* SD Law, aka Simon Dippenaar & Associates Inc., is a law firm of specialised eviction attorneys, and property lawyers, based and serving landlords and tenants in Cape Town, Johannesburg, and Durban. If you need help, please contact Simon on email@example.com or 086 099 5146.