Rentals make up a vital segment of South Africa’s property market. Over the past few years, this sector was thrust into the spotlight like never before thanks to the advent of the National Credit Act (NCA) and the recession which resulted in a sharp decline in bond qualifications and financial liquidity overall.
In theory, leasing a property is a sound premise: in practice, it can lead to all manner of legal complications for both the landlord and the tenant. Those considering becoming involved in any such arrangements would do well to consider the legalities before doing so.
Recent media commentary on the rental market suggests that it is in a somewhat unsettled state. However, there are seemingly still pockets of strong performance. According to Jason Parker, a seasoned Krugersdorp based real estate agent, the rental market is “alive and well” with the entry level, sectional title sector currently proving the most buoyant.
He attributes the popularity of this sector to urban sprawl, coupled with heavy traffic congestion which is catalysing demand for lock-up-and-go properties within close proximity of work nodes. Demand for upmarket rentals is also manifest though he says with properties at Featherbrooke and Ruimsig Golf Estate fetching rental prices of up to R50 000 in some instances.
Demand aside, Parker warns that potential landlords need to be aware that rental defaulters are a reality. He adds that landlords need to price their rental accommodation fairly as awareness as to what constitutes a fair lease has increased significantly.
Midrand based property agents concur with Parker in that they too have witnessed strong demand for rental properties, particularly at high end security estates. Such properties are typically leasing for between R10 000 and R15 000 pm on average with some homes at Midrand Estates fetching as much as R38 000pm.
While demand for rental properties appears to be fairly robust, paradoxically, the buy-to-let market is experiencing a slump, particularly at the top end of the market due in large part to additional financial constraints and the fact that rental returns are in many cases covering less of an investor’s bond servicing costs.
In order to avoid the pitfalls associated with renting, a rental agreement should be drafted. A rental agreement is a legally binding document and must be considered as such says Parker. Typically, such documents contain the following:
• The rental amount and date on which it is due: Payment is usually required by the first day of each month. If payment is not made within 20 days, a landlord is entitled to blacklist a tenant
• Rental increase: Rental amounts are usually increased annually. The amount by which it is in increased needs to be agreed to in writing.
• The deposit: The deposit cannot be offset against the last month’s rent and can only be used for making good any damages that may have resulted during the term of the lease.
• Notice period: If the lease agreement is month-to-month, then a calendar month’s notice is required to cancel the lease. A landlord cannot prematurely end a fixed-term lease. This remains the case even if the property is sold or the landlord wishes to take occupation of the premises. Moreover, new owners cannot cancel the lease either but must wait until the end of the existing lease period. If for any reason a tenant wishes to vacate the premises prior to termination of the lease agreement, then the tenant is still liable to pay the rent until such time as a replacement tenant has been found.
• Pets: It is usually stated from the outset whether or not the premises is pet-friendly. Moreover, rental agreements usually state that if a tenant wishes to acquire a pet at a later stage, permission to do so has to be given by the landlord, in writing.
This is a seemingly typical rental agreement and one which Parker says both landlords and tenants usually sign without a second thought. Unfortunately, a number of crucial aspects have been overlooked.
• Purpose: The purpose for which the rental accommodation is intended must be adhered to, failing which a tenant could be deemed to be in breach of the agreement
• Assignment and subletting: Failure to include this clause opens the door to all manner of pitfalls, usually in the form of undesirable tenants
• Repairs, alterations and damages: Although seemingly trivial, Parker cites this as one clause which cannot be ignored. “Common law states that a landlord must hand over and maintain the property for the purpose for which it was let. Under this provision, the landlord is responsible for the structure of the property and is expected to maintain any electrical, plumbing or electrical apparatus. However, a landlord may not be held liable for any damage caused by a tenant, the tenant’s family or guests. Under this clause, tenants are also expected to maintain the interior of the rental property as well as any facilities which have been designated for their use such as a garden or pool. It must be noted that should a landlord fail to honour his obligations under this clause, tenants are not entitled to withhold rent in lieu of repairs as it is deemed illegal. A tenant should rather seek legal advice on the matter. ”
• Emergency entry and inspection: Notwithstanding an emergency, a tenant is obliged to allow a landlord access to inspect the property. However, reasonable notice of intent to enter a tenant’s premises is mandatory.
• Abandonment: This is defined as absence of the tenant for a minimum of two weeks without notice. Under such circumstances, the landlord may opt to terminate the agreement and regain possession in the manner prescribed by law.
• Failure to pay: If payment isn’t made by the due date, a tenant is deemed to be in breach of the agreement. A landlord may cancel the lease immediately or demand payment in writing. The number of days to remedy payment is usually pre-determined by a breach clause. Should payment still not be forthcoming, the landlord can request the tenant to vacate the premises.
For more on landlord/tenant issues, visit our Advice Centre.