With South Africans feeling the effects of on-going near-recessionary economic conditions, landlords have to be extra careful in selecting tenants.
According to Ian Teague of Gunston Attorneys, this year has seen a rise in the number of cases dealing with defaulting tenants and in instances where the landlord has had to go ahead with an eviction.
Buy-to-let investing in property is becoming popular, but Gunston Attorneys will testify that they regularly come across instances where the landlord has limited legal knowledge and has done far too little investigation into the rules governing property leasing.
It has been found that landlords in most cases would have done very little checking of the potential tenant’s credit, previous leasing and employment records.
“It is perfectly understandable that people who have proved successful in other spheres should feel that they can handle a simple lease arrangement on their own,” says Teague.
However, he says the truth is that all their experience shows that they are likely to make serious, costly mistakes which can complicate matters, especially now that the Consumer Protection Act is operative and protective of consumers’ rights.
In light of the new legislations, he says many of the lease agreements drawn up by do-it-yourself landlords are unenforceable.
Teague warns that when things do go wrong and landlords find themselves with a defaulting tenant who simply cannot or will not pay – and is also possibly neglecting the maintenance of the property – eviction proceedings have to be initiated, even though they cause emotional distress and result in further non-payment of rents.
“An eviction can take as little as three months, but if it is contested may well take far longer and during this time it is highly unlikely that further rents will be collected.”
Teague says attorneys are usually hesitant to start an eviction process.
It has to be recognised that quite often this is the only course left open to a landlord.
“In my experience, once a tenant starts defaulting, it very quickly becomes habitual (usually because he or she is suffering financially) and delays by the landlord in taking action can be very costly.”
Once defaults start, the writing is on the wall and experience shows that it is better to cut one’s losses with a poor tenant and start again.
Asked if most of these difficulties cannot be avoided if a landlord appoints a competent rental agent, Teague says that the competency levels of rental agencies throughout the Greater Cape Town area vary widely as does their ability to detect in advance tenant trouble and to handle difficult tenants.
Although there are brilliant agents who manage to keep their default payments below 2 percent or 3 percent, there are many who are now operating on 10 to 20 percent defaults where rents are either not paid or paid seriously late.
He adds that the relationships between the tenant, landlord and agent are important and in Gunston’s experience, the small one or two men teams giving a dedicated service to a specified area often achieve the best results.