A badly managed rental property can cause financial loss, stress and damage to the property. Here are 7 elements for landlords, tenants and agents to think about.
“We are constantly plagued by rental horror stories - nightmare tenants, greedy landlords, lazy agents and countless other woes surrounding the rental industry,” says Grant Rea, Rental Specialist at RE/MAX Living. “Over the last ten years as a rental specialist, I have found a few crucial elements not thoroughly considered by all parties concerned. Sadly, they are the catalyst for impending disaster.” He adds that as a landlord, you want your investment protected, and as a tenant, you want your deposit looked after and a comfortable place to live. To avoid the frustration of financial loss, stress and damage to your property, make sure you are not committing these seven deadly rental sins:
1. Inadequate screening of tenants
This is the most wicked of the deadly sins, as poorly screened tenants are incredibly costly in the long run. Find a trustworthy rental agent to assist you in this area and pay for your tenant to be professionally screened. Never accept tenants on face value, as they are often desperate to find a home and may resort to saying or doing anything to garner your trust. Protect your investment and yourself:
Complete a thorough credit screening with a recognised credit bureau
Verify their employment and income, covering at least three times the monthly rent
Keep a copy of their ID/visa or immigration status
Contact at least the last two landlords or rental agents listed as references
Do a Google or Facebook search to see if they are a good personal fit for your property
2. Poorly structured lease agreement
With the deadliest of sins being a verbal lease, a close second is a badly constructed lease or one that falls foul of the law and does not adequately detail the obligations and rights of both the landlord and the tenant. A lease must be legally drawn up with clauses in line with current legislation and all parties’ interests and rights outlined. Don’t be tempted to buy an over-the-counter lease at a stationery store. If you cannot afford a legally drawn-up lease agreement, you can obtain one for a reasonable fee from various online resources. Apart from the main elements of the lease being the parties, premises, rental amount and dates, there are several other crucial elements that must also be included:
Who must pay for the upkeep of the garden and servicing of the pool?
Who must pay for which utilities and how will they be paid?
House rules that the tenants must follow in a sectional title unit
How will the lease be renewed on the anniversary of the lease?
3. Insufficient damage deposit
Another critical error made by agents and landlords is not taking sufficient damage deposits. Traditionally, a one-month deposit was the norm, but with tenants under greater financial pressure and reneging on their last month’s rent, a minimum of two-month deposit is the requirement today. It is important to bear in mind that the legal costs of dealing with a defaulting tenant will also add up, so taking a two-month deposit is a bare minimum.
A landlord may not benefit financially from the tenant’s deposit and may not contract out of paying interest - it’s the law
The handling of damage deposits is clearly outlined in the Rental Housing Act. The deposit remains the tenant’s property and needs to be deposited in at least a savings account in a financial institution in South Africa. The interest on the account is to accrue to the tenant. Further, the refunding of the deposit is due within seven days after the lease expires, if no deductions are made. This period is extended to 14 days if deductions are made and 21 days if the tenant fails to attend an outgoing inspection. A landlord may not benefit financially from the tenant’s deposit and may not contract out of paying interest - it’s the law.
4. Rent due on the seventh
An insidious urban myth often rears its head in rentals where tenants are under the misguided notion that there is a common law ‘grace period’ for payment, giving them till the seventh of the month to pay. The fact is, no such law or premise in law exists. The lease is the indicator of when the rent is due and failure to pay the rent by such agreed date will render the tenant in breach of the tenancy. As a landlord or agent, you need to ensure that tenants understand the payment method and due date, as well as the consequent results for late payments.
5. Failure to do inspections and make records
If there was one deadly sin committed by landlords and agents alike, that cause more disputes than any other, it would be neglecting to do an incoming and outgoing inspection which is required by law. Landlords and/or agents must jointly inspect the property at commencement and termination of a lease and make a good record of the current state of repair of the property. Many landlords neglect this exercise and pay heavily for it at the termination of the lease as deductions will be disallowed by a Rental Housing Tribunal in the absence of a good record. “I suggest a simple video taken with a digital camera or smartphone which is loaded to YouTube or burnt to disc. Alternatively, date-stamped photographs are the very minimum. A good record eliminates disputes. At the time of termination when your tenant moves, it is easy to refer to the condition at commencement, so your tenant has an opportunity to restore the property to a similar condition, fair wear, and tear aside,” says Rea.
6. Failure to plan and execute maintenance
As a landlord, you are obliged to offer the property you rent in a fit and habitable condition, that does not hinder the reasonable day to day enjoyment of the property. It is prudent as a landlord to ensure you earmark a percentage of your rental income towards maintenance. It will mean you attract good tenants and keep current tenants happy. Often disputes arise when landlords and/or agents neglect necessary works and repairs that may render a property unfit or uninhabitable. Inspections during the lease period are prudent and necessary to stay on top of small niggles that may become big issues later. Wear and tear is inevitable and it is wise to maintain a good state of repair in your rental property. Too many disputes arise where tenants decide to withhold rental because of neglected repairs and maintenance. A clearly defined lease also has bearing on how maintenance is handled.
7. Failure to give adequate notice of breach
The final deadly sin is the failure to efficiently and swiftly advise a tenant in writing of a breach of tenancy. “I am often shocked to hear of a tenant who is two or three months in arrears, having not been informed by their landlord in writing that they are in breach of their tenancy with failure to pay to result in termination of the lease,” says Rea. He adds that getting a defaulting tenant to pay or vacate requires swift decisive action. Do not hesitate to notify a tenant of their breach of tenancy by the third day of the month if rent is due on the first. It sets a clear boundary and it means if legal action is necessary that you have already expedited the process so it may escalate to a court of law. The first question a magistrate or judge will ask if the tenant was adequately given notice. If this was not done as prescribed in the Rental Housing Act or Consumer Protection Act, most courts will request this done before action may be brought.
Rea concludes by saying that avoiding these seven deadly sins will ensure that tenants are happy and landlords are able to make the most out of their property rental portfolio.