PROPERTY NEWS - The number of non-paying tenants would shock any potential investor from considering owning and managing a rental property, says Louw Liebenberg, CEO of PayProp, a processor of residential letting transactions.
“In a recent review of the claims history of our DepositGuarantee product, we found that 13% of tenants who move out of a property do not pay their last month’s rent. Combined with other industry statistics which show that on a month-to-month basis nearly 6% of tenants do not pay their rent in the month that it is due, the problem is larger than some landlords would like to admit.”
Liebenberg has five tips to deal with non-paying tenants:
1. Use an estate agent
The reality is that estate agents have access to tools that the average private landlord will not readily find. Firstly, they have far more sophisticated tenant assessment tools, more thoroughly prepared leases, legal resources and, most importantly, time to deal with these issues.
Liebenberg has five tips to deal with non-paying tenants:
1. Use an estate agent
The reality is that estate agents have access to tools that the average private landlord will not readily find. Firstly, they have far more sophisticated tenant assessment tools, more thoroughly prepared leases, legal resources and, most importantly, time to deal with these issues.
Secondly, they have seen ‘every trick in the book’ and are therefore usually immune to some of the strategies used by tenants to delay payment.
2. Sign a mandate
If you use an agency, ensure that you sign a written mandate with them. The mandate details what the obligations of the agency are towards you and the tenant. Most importantly, it should also outline the limits of the authority you grant to the agent in dealing with a non-paying tenant.
2. Sign a mandate
If you use an agency, ensure that you sign a written mandate with them. The mandate details what the obligations of the agency are towards you and the tenant. Most importantly, it should also outline the limits of the authority you grant to the agent in dealing with a non-paying tenant.
For example, has the agent clearly outlined the process that they follow in the case of non-payment? At what point can the agent start incurring legal costs that you as a landlord will be liable for?
If you do not clarify these upfront, it may cause massive confusion and delays in dealing with a delinquent tenant.
3. Insist on a proper credit check
Insist on seeing the detailed credit check performed by the agency. Don’t just look at credit scores, but try to also understand the tenant’s debt position relative to their income and the rental you are asking.
If you do not clarify these upfront, it may cause massive confusion and delays in dealing with a delinquent tenant.
3. Insist on a proper credit check
Insist on seeing the detailed credit check performed by the agency. Don’t just look at credit scores, but try to also understand the tenant’s debt position relative to their income and the rental you are asking.
PayProp has found that the average tenant has monthly debt commitments that are 1.3 times that of the rental being negotiated.
Therefore, just looking at what someone is earning (or driving or wearing) and thinking that they earn enough to afford the rental, is misleading. In fact, the recent PayProp Rental Index found that the percentage of high and very high risk tenants increases for tenants requesting rentals that are above R15,000.
