THE UNPAID LANDLORD

Private Property South Africa
Marlon Shevelew

A non-paying tenant simply messes things up don’t they?

You buy a property, after making a commercial decision as to its viability, yield etc

You rely on the monthly rental to gear yourself and to allow you to bask in the glory of the eventual post bond annuity income and the concomitant “capital appreciation”, to allow you to grow your property portfolio and to strive to become a property doyen… or something like that.

But the tenant does not pay the deposit on time or at all, he pays the rent late or not at all, he loses his job, his new job pays less than his old one, he splits from his partner, his cousin needs to move in, he has alleged “squatter rights”, he is going to the rental or consumer tribunal (whichever is closer), he has nowhere else to go! You can’t get hold of him on the phone because every time you pick up the phone to call, you end up placating a disgruntled bank manager as to the short bond payments on the property that was supposed to make you money, not cost you!.

Ok, a bit melodramatic, but a lot of truth lies in the fact that a non-paying tenant is very dangerous.

A few inescapable points of warning which might help:

  • Screen your tenant; be merciless in your criteria. After all, this is a business decision;

  • Have a decent legal compliant lease in place;

  • Have a respected managing agent to assist you, if you are happy to pay for this service;

  • Be vigilant with incoming inspections, snag lists - these will bite you come the expiration of the lease and outgoing inspection, if not done correctly;

  • Get the deposit upfront to cover potential damages and make sure that if it needs to be utilised during the currency of the lease that the tenant replenishes it;

  • Remind the tenants about imminent rental payment, belated payments and always draw the tenant back to the lease terms and consequences of not paying;

  • Demand payment when not paid timeously and if you entertain a late payment remind the tenant that belated rental payments are a breach of the lease agreement and your acceptance of a late payment does not mean that you will allow that to happen again

  • Have a decent attorney on standby in case points 1 -7 don’t work out

Be alive to the fact that the profits achieved from a rental property investment is marginal compared to rates, maintenance, legal fees etc, so ensure that you treat the rental property as a business proposition and not as a haven for an occupier whose payments are as inconsistent as the New Zealand rugby team.

Marlon Shevelew

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