rent Archives | Eviction Lawyers South Africa

Landlords likely to have stricter credit and rental checks after Covid-19 financial impact

By | COVID 19, Lease Agreement, Rental deposit
Rental market likely to see stricter credit checks

Landlords are advised to use their judgement and approach each situation on a case-by-case basis. (iStock)

Reprinted from Fin24, by Carin Smith – 2021-01-11

  • Most South Africans rent the property where they stay
  • Many are now also without jobs or have experienced a drastic reduction in income due to the pandemic
  • Landlords are likely to apply increasingly strict credit and rental record checks

South Africa’s rental market is likely to show only very minimal growth – if any – due to the current combination of high vacancy rates and economic pressures on tenants, according to Gerhard Kotzé, managing director of the RealNet estate agency group.

In his view, most landlords and rental agents are likely to apply increasingly strict credit and rental record checks. Deposit requirements are also likely to rise.

“A very large number of quality tenants have become home buyers in 2020 due to the lower interest rates, and on top of that landlords have had to contend with extensive non-payment issues due to the economic effects of Covid-19 pandemic and lockdown, so they are already very cautious when it come to new tenants,” says Kotzé.

“And unfortunately, a large number of those who are likely to be looking for rental properties now are people who already have some financial problems. So, there will be a need to be even more careful.”

Alternatively, says Kotzé, many rental property owners will probably just decide to sell off their portfolios now, so astute investors who have the means to buy quickly should look out for the “bargain” flats and townhouses that will come on to their local markets as a result.

Grant Smee of Only Realty says even in the best circumstances, securing reliable tenants is tricky, but the pandemic has added an extra layer of complexity into the mix.

He says data shows most South Africans rent rather than own the property where they stay. Many are now without jobs or have experienced a drastic reduction in income, leaving them suddenly unable to afford rent.

“This shift gives rise to a situation in which tenants hold more power than before and has led to an increase in short-term rental agreements being signed. In addition, tenants are calling the shots in terms of deposit amounts and various other conditions which leave landlords feeling vulnerable,” says Smee.

Recent statistics from the Tenant Profile Network (TPN) indicate that 60.74% of tenants paid their rent on time during the last quarter of 2020, while 9% of all tenants are not paying rent at all. “Long-term rentals provide financial security for landlords, and in the past agreements were generally set up to protect the interests of both parties equally.

However, today, tenants may have more say in compromises when it comes to issues such as deposit payments too.

“In a market with excess rental stock, landlords may be more amenable to reduced deposits and short-term rentals in order to stand out from the crowd,” says Smee.

“Landlords looking to take advantage of the demand for the short-term letting market, need to ensure their property provides excellent value and a unique offering. Here factors such as location, price, quality and overall experience can ensure that they stand out from other competing units.”

Challenges for Landlords

Smee says landlords were largely unprepared for tenants being unable to pay during lockdown, leaving many of them without access to an open line of credit. Very few landlords have rent default insurance and payment holidays are now up.

“While tenants are certainly more able to demand compromise, and landlords are beholden to new pressures such as short-term rental agreements, it’s unlikely that tenants will be able to ‘strongarm’ landlords into drastically one-sided agreements,” says Smee.

Landlords are still considered to hold most of the negotiating power and retain the ability to write terms and conditions into leases which are favourable to them. On the other hand, landlords feeling the pressure to retain good tenants or adjust to the difficult current market may see fit to compromise and offer lower deposits and short-term rental agreements to remain competitive.”

Smee suggests that the current situation in the rental market requires agreeing on a middle ground, where both parties consider the other’s circumstances. This could include tenants paying an available rent, and landlords being more flexible by offering short-term rentals, deposit utilisation or rental deferment.  Landlords are advised to use their judgement and approach each situation on a case-by-case basis.

Links added by SD Law

Do you have questions about your lease agreement or rental deposit?

Whether you are tenant or landlord, if you have questions or concerns about your existing lease agreement or security deposit, contact Cape Town law firm SD Law for a confidential discussion. We will explain your rights and responsibilities to ensure a worry-free tenancy. Contact Simon now on 086 099 5146 or email him on info@sdlaw.co.za.

Further reading:

Moving house and paying rent in lockdown level 4

By | Eviction news, Eviction notice, Evictions, Lease Agreement, Rent

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.

TPN MD Michelle Dickens. Image: Supplied

“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.

Read: A third of residential tenants won’t pay full rent this year

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.

Paying rent

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.

Two options

“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.

Read: Evictions, power cuts heighten SA housing crisis amid lockdown

“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 sdippenaar@sdlaw.co.za or 086 099 5146.

Related reading:

Tenants from hell

When and how to sue a tenant

When and how to sue a tenant

Keep your rental income flowing freely

By | Evictions, Lease Agreement, Rent | No Comments

Rental Income - Eviction Lawyer South Africa

Have you recently become a landlord? Or maybe you’ve had problems with tenants in the past and want a bit of guidance to avoid trouble in the future? We’ve laid out the key things you need to know when embarking on a rental agreement with a new tenant.

Is a formal lease necessary?

A written lease is not essential for your agreement to be binding, but it can save a lot of hassle later on and prevent disputes over ‘who said what?’ Putting everything in writing will clarify the terms and conditions of the rental agreement and ensure you have captured all the minutiae that can lead to conflict if not addressed at the outset. Are pets allowed? Can your tenant let the spare room for cash? What date in the month should the rent be paid? A written lease spells everything out so there is no doubt on either side. And if your tenant requests a written lease, you must comply.

We can draw up a lease for you or you can download a standard lease agreement here.

What information should be included on a written lease?

  • Your name and your tenant’s name
  • Your postal address
  • Your tenant’s postal address
  • The address of the property being leased
  • The agreed rent, the amount of increase and when it may increase (e.g. by 10% at annual renewal) and the frequency of payment (monthly, quarterly, etc.)
  • The amount of any deposit
  • What each party is responsible for, e.g. utilities, maintenance, etc. (usually, tenants pays for charges related to things they use, such as water and electricity, and landlords pays for charges related to the property, such as rates)
  • The notice period for quitting the property (applicable to both parties) and the conditions under which you can end the agreement early (for example, if specific maintenance is not done, or if the tenant is in arrears with the rent)
  • If there are ‘house rules’, such as no loud parties, they should be signed by both parties and attached to the lease
  • A list of defects drawn up during a joint inspection when the tenant moves in. This should be signed by both parties and attached to the lease

How does a background check work?

You should always ask prospective tenants for references. While it is normal to obtain a reference from the current tenant, it can also be helpful to speak to previous landlords, in case the current landlord gives a good reference simply to get rid of an undesirable tenant. You should also request a letter from the tenant’s employer to verify his employment status and income. You can also do an ITC credit check (call TransUnion ITC on 0861 482 482 or visit www.transunionitc.co.za) or we can carry that out for you.

What about a deposit?

A deposit is your insurance against your tenant defaulting on the rent or damaging your property beyond normal wear and tear. A deposit must be put in an interest-bearing account for the duration of the tenancy and given back to your tenant, plus the interest it has earned, when the tenant moves out. But the deposit can legally be retained and used to pay for repairs or to cover the money owed to you in the event of non-payment of rent.

What if the tenant is behind with the rent?

Technically, your tenant is in breach of contract. Your lease should have a breach clause in it; this is the time to enforce it. If you don’t have a cancellation agreement or breach clause in the lease, or if you want to give your tenant a reasonable chance to put things right, it is good practice to write a letter giving your tenant seven days to pay, failing which you will cancel the lease. We can draft the letter and send it on your behalf. Many tenants will take a ‘lawyer’s letter’ more seriously than one from the landlord alone!

What is the eviction process?

A landlord may not evict a tenant. You may seek a court order to evict a tenant if your tenant is in breach of contract, for example if the rent has not been paid. However, we would urge you to encourage the tenant to rectify the breach. In fact the Consumer Protection Act allows for this. Legal action is the last resort and, however justified, is never pleasant, especially where someone’s home is involved, so it is always advisable to give the tenant the opportunity to put things right.

What if there is damage to the property?

There will always be normal wear and tear. More serious damage can be repaired out of the deposit, if you asked for one. These steps will ensure a fair process for both parties:

  • When your tenant moves in, inspect the property together and list, in writing, any existing defects – you should both sign this and attach it to the lease agreement
  • When your tenant moves out, inspect the property again together, preferably just before moving day. Compare the two lists
  • Either of you can do the repairs. If you decide to do them yourself, keep all receipts for repairs paid for out of the deposit. Your tenant is entitled to see them
  • If the repairs cost less than the deposit plus the interest earned, you must repay the balance to your tenant

Who can help?

The Rental Housing Tribunal can advise you of your rights and responsibilities as a landlord and can help in the event of a dispute with a tenant.

Or contact us. At Simon Dippenaar & Associates Inc. we are a firm of specialist eviction attorneys with extensive experience in eviction law and property law. We act for both landlords and tenants and therefore know the challenges faced by both parties; and we have an intimate knowledge of the legislation from both sides.

Call Cape Town Eviction Attorney now on +27 (0) 86 099 5146 or email sdippenaar@sdlaw.co.za if you need help drawing up a lease or handling a difficult situation with an existing tenant.

Further reading: