Defaulting on rent payments has ‘regrettably’ become more common this year, says Bill Rawson, Chairman of the Rawson Property Group. This statement was confirmed recently by figures from TPN, which show that only 72% of South African tenants are in good standing with their landlords and 18% are now either paying late or defaulting altogether.
When a tenant finds himself struggling to meet his monthly rental payments, said Rawson, all too often he goes into denial on this subject, does not talk to his agent or landlord and ends up in a very tight position where no one benefits.
“The first point to be grasped,” he said, “is that if you have a good or even a reasonably good tenant, it usually pays to hold onto him rather than to risk looking around for a replacement that may not be as reliable or as satisfactory. You have, therefore, to get across to your struggling tenant that, although he may now be in difficulties, disaster is not inevitable provided he plays open cards with you.”
If, for example, said Rawson, the tenant has lost his job or suddenly faces huge medical expenses and simply cannot pay his rent, he must tell this to the agent or landlord immediately. Then, he said, the wise landlord/agent will try and arrange for a one or two month - or possibly even longer - rent moratorium, in many cases linking this to an agreement whereby the tenant pays the sums back in extra rent if and when his circumstances improve.
“Obviously this can simply compound the problem,” said Rawson, “but again it is worth stressing that if the tenant has proved responsible to that point it is usually worth helping him through a difficult patch.”
It might also pay to go the whole hog, said Rawson, and to draw up a new lease with the tenant where an initially significantly lower rent is compensated for by an obligatory higher rate paid six months or a year later.
Alternatively, said Rawson, the tenant in financial trouble should consider asking if he can sublet the unit or simply find another tenant to take over his lease. A big advantage of this system, he said, is that it can save the landlord paying any extra agency commission and it enables the tenant to retain control of potential tenant visiting times, thereby preserving his privacy.
Tenant obstinacy, when it is encountered, said Rawson, is often based on their not appreciating that the landlord himself may well be paying monthly bond repayments on the property and has no other means of meeting this debt. Here again, however, if the tenant is open and upfront with the landlord or his agent it can make it possible for the landlord with a bond to deal with the bank, where, if the situation has not got out of hand, he is likely to receive a sympathetic hearing, as banks dislike repossessing properties.
“The basic lesson, therefore,” said Rawson, “is to talk to one another and if possible hold onto good tenants.”