Residential rental market a potential legal minefield for landlords
Renting out residential property has always been considered a relatively easy source of income as well as a great way to get a foot in the property market, but this is no longer the simple exercise it used to be and has become a potential minefield for owners wanting to rent out property on their own.
Originally only governed by the Rental Housing Act, the property rental market has in recent years become an extremely complex legal field, says Lorraine Dellbridge, rentals manager for Lew Geffen Sotheby’s International Realty in the southern suburbs, Noordhoek and False Bay.
The National Credit Amendment Act (NCAA), which came into effect in March is the latest in a string of new laws which have been promulgated in recent years, including Rental Housing Amendment Bill, Prevention of Illegal Eviction from and Unlawful Occupation of Land Act, the Protection of Personal Information Act and, of course, the Consumer Protection Act.
“Each of these plays an enormous role in the rental arena and landlords who are not familiar with them could find themselves losing money and tied up in lengthy legal battles,” says Dellbridge.
“Not only are many of these new laws generally tipped in the tenant’s favour, but landlords also need to understand that nowadays people are a lot more aware of their consumer rights in general.”
Dellbridge says that although many of the regulations were initiated to do away with unfair practices such as landlords pocketing deposits for no reason, they have also limited landlords’ access to information that can be vital in selecting a tenant.
The new National Credit Amendment Act stipulates that all adverse information recorded on a credit bureau must be removed once the debt has been settled, which can make it very difficult for a landlord to check a prospective tenants’ rental payment track record.
“A compounding factor is that many cash-strapped South Africans are deeply in debt,” says Lew Geffen, chairman of Lew Geffen Sotheby International Realty. “Just looking at a study like the Debtsafe data released recently shows that 57.8 percent of the population is categorised as ‘delinquent’ in their debt payment behaviour. With statistics like that landlords really can’t afford to gamble with what is often their biggest investment.
“The days of casually letting property with a standard lease from a stationery store are over and, unless a landlord is well-versed in all the new laws and regulations, it’s advisable to enlist the services of an experienced rental agent who will save a property owner a tremendous amount of frustration, time and in the long run – money.”
Dellbridge says that vetting a new tenant includes a number of screening processes such as confirming stable employment, checking with previous landlords to establish a rental track record and doing a credit check. Reputable estate agencies have effective access to all this information as well as application forms that include the relevant clauses which allow prospective tenants to authorise the background checks as required by law.
However, Dellbridge warns that there is a vast difference between a selling agent and one who specialises in rental property and it is therefore essential to select a reputable agent who specialises in rentals.
“The best way to do this is by asking questions – and don’t be afraid to do so as the potential risks associated with property rental are now considerable. Landlords need to ensure that they have covered all the bases before they rent out what is probably their most expensive asset.”
Important questions to ask include:
Is the agent registered with the Estate Agency Affairs Board? If you’re not sure, ask to see a copy of a valid fidelity fund certificate.
How long has the agent been letting property and how many homes are presently on the agency’s books?
What is the agency’s process for reviewing potential tenants and how do agents determine whether the tenant is suitable for a property?
Do the agents conduct police checks, or checks regarding their past rental history, current employment, and others?
Does the agent always insist on a deposit? This should be a non-negotiable aspect of any rental deal.
What services does the letting agency offer? This is particularly important for absentee landlords. Good letting agents should have a list of reputable service providers, including plumbers and general maintenance people.
Ask to see a copy of the agency’s standard rental contract. This allows the landlord to fully understand both his and his tenant’s obligations and also affords the opportunity to amend the contract if necessary.
Dellbridge says: “Property management is not just a question of collecting the rent; it is a comprehensive service which should be provided by trained property managers who have demonstrated longevity in the role which proves that this is a career for them.
“If as a landlord you’re not convinced that you’re fully conversant with the new laws and how they affect your rights and access to information as a property owner, don’t even think about going it alone. It could end up costing you tens of thousands in legal bills, never mind potential damage to your property from an unsuitable tenant.”
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