Landlords - All Risk and No Guarantee

Landlords - All Risk and No Guarantee

Private Property South Africa
Anna-Marie Smith

For landlords to achieve success in the long term, high levels of proficiency in risk management is absolutely essential.

Industry specialists view the business of a reliable landlord to only be as good as the factually correct and trustworthy data gathered, either by themselves or by appointed tenant and credit rating agencies. Hard earned experience, particularly during the past recession, has necessitated that landlords acquire multiple skills in matters legal, financial, technological and criminal.

Most landlords, other than a minority of powerful industry moguls who can afford to cover their risks by paying insurance premiums, operate amid minimal security while relying heavily on the expert screening services of industry specialists. To ensure profitability in the long term, landlords foot hefty bills to establish both the tenant worthiness and credit worthiness of private individuals. As a result, they also rely heavily on factually correct data supplied by banks, employers, previous landlords, and previous eviction records.

Managing Director of TPN Credit Bureau, Michelle Dickens says the single biggest risk to landlords is not placing a quality tenant. She says by checking the most essential factors, inferior quality tenants can be avoided. In the case of falsified documentation, she says the passing of personal identification, police and bank checks will not be possible, thereby eliminating the need for further ratings. And despite all the necessary checks for tenant behaviour and credit records being in place, she says landlords remain at the risk of unexpected changed tenant behaviour, that may result from unemployment, disability, illness, etc.

The services provided to landlords by such agencies include identification documents, bank records, references from previous landlords, police checks, eviction record searches, credit records, employment records, valid pay slips, as well as utility bills. To follow through efficiently, landlords employ qualified manpower to communicate with all parties involved to process lease documentation, clear deposits, do property inspections, and to monitor monthly rental payments. In the case of evictions from properties, which in itself is a most complex, time consuming and difficult course of action, landlords have little choice but to employ the services of legal professionals or the tribunal court.

Another risk to landlords is a potential tenant under Debt Review. Dickens says in view of the New National Credit Act, landlords reserve the right not to enter into a new lease with a tenant while under debt review, to whom credit providers may not extend credit during the process. She says if necessary, landlords are free to consult with debt councillors to enquire about the rental affordability of a potential tenant. Very importantly she says, is not to ask what a client can afford, but how much the debt review budget stipulates for rental payment.

This is not only because of the increased risk of dealing with heavily indebted individuals, but also because it provides the knowledge that reduced monthly rentals may have to be considered. Because landlords benefits hugely from the scrupulous services of industry players, they are equipped with the best possible fraud prevention tools to identify and eliminate the signing up of delinquent tenants.

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