In a recent report issued by the Tenant Profile Network (TPN) it was noted that 81 percent of South African tenants are in good standing with their rental payments. Although this figure has not changed from the previous quarter, it is well up from the 71 percent low recorded during the recession.
While the stats are encouraging, there are still people who seem to go from property to property, racking up debt and leaving a trail of destruction in their wake. Unfortunately, unlike reputable letting agencies, many private landlords do not conduct thorough background checks before they rent out their premises, and this can prove to be disastrous.
Advocate Carine de Beer, the managing partner of Legal2Landlords, a web-based legal advice and services consultancy for landlords, says people who decide to run their own ‘businesses’ and rent out property privately need to follow a couple of basic rules. “Clearly, choosing the right tenant is of enormous importance and we always recommend that if the landlord is not going to do a credit check on the prospective tenant, they at least use a comprehensive check-list.”
The following information is of particular importance:
• The name and contact number of the tenant’s employer should always be supplied and the employer phoned to ensure that the prospective tenant has a solid monthly income from which the rent can be paid.
• Landlords should always ask for the contact number of the previous landlord and get a referral from them. However, new landlords should be aware that if the tenant’s history is not good, the present landlord may stretch the truth a little to get rid of him or her.
• The tenant must supply his ID and tax number. This is to ensure that should the landlord end up in a bad debt situation, he has all the necessary personal information (documents) to hand the tenant over to professional debt collecting organisations.
It should be noted that it often happens that when the tenant has a bad credit history, he or she will request that the lease is drawn up in another person’s name. Very often this will be a husband or wife, friend, father or even their own child. De Beer recommends that if at all possible, landlords should make sure the lease is in the name of the person actually occupying the premises and who will be making the monthly rental payments.
In the same breath, she adds that in cases where the lease is in the name of a legal entity, there must be a clause in the rental agreement that stipulates that the tenant himself is jointly and severally liable for all costs and for any loss or damages.
Multiple tenants should always be avoided. It is a nightmare chasing several tenants for unpaid rent. It is recommended that the lease be signed by one tenant who is then responsible for the full rental amount. It is then up to him or her to collect the proportionate rental amounts from the others.
‘Off the shelf’ rental agreements should be viewed with caution as, in De Beer’s opinion, they are inherently dangerous. “A one size fits all type of lease agreement will never cover all the aspects of a unique landlord/tenant relationship. If the premise is, for instance, a unit in a sectional title development, the house rules should form part of the lease agreement.
Rules regarding noise levels, activities allowed on the premises, the use of common property and the number of occupiers should always be included in a lease to avoid disputes.
It is also essential that the landlord understand his obligations and the basic rights of the tenant. Of importance here is that the premises must be fit for the purpose for which they are intended, the landlord’s duty to maintain the premises and the tenant’s right to privacy. The detailed stipulations in the Rental Housing Act regarding in-going and out-going inspections cannot be stressed enough.
De Beer states that while a deposit is not a legal requirement for a valid rental agreement, there are very good reasons why landlords should ask for an up-front payment. “A deposit is held by the landlord to cover the costs of any unpaid rent, services and charges in arrears or damage to the property. A deposit is not a token of goodwill or an indication of commitment by the tenant, and it is most definitely not a term loan to the landlord.”
If the lease is well-drafted, the basic principles adhered to and good legal advice has been obtained, there is no reason why a landlord cannot rent out his property privately and in that way maximise potential rental income.
