For those wanting a steady monthly income, buy-to-let investment is still one of the best asset classes on the market.
John Smyth, CEO of Multi Net Mortgages, says it would, however, be even more attractive if landlords and rental agents did not from time to time have to deal with non-paying tenants.
Smyth says the situation is exacerbated by the fact that South African property law is slanted in favour of tenants, rather than landlords.
“Since the onset of the recession or near-recessionary conditions we are hearing from rental agents that they now have to deal with two or three times as many non-paying tenants as previously,” he says.
“The problem is that, although the law does protect landlords’ from non-compliant tenants – and indeed from any breach of the lease agreement, the legal processes to bring this about can be costly and time-consuming.”
Smyth says this is especially true when the tenant has a lawyer who knows just how to delay matters on their side.
“When a tenant cannot pay his rent or starts paying late or only partially, the landlord has the right to cancel the lease forthwith, although in practice he will usually grant the tenant an extra week to rectify the situation,” he says.
“If the tenant does not leave, the landlord’s lawyer can then start the full legal process under the Prevention of illegal Evictions Act (PIE Act). If the tenant is on the standard one-month notice arrangement, 30 days will be allowed to vacate the premises.”
If it then transpires that the tenant has no intention of leaving, Smyth says the landlord will apply to a magistrate for an ex-parte eviction order.
“This will set a date for the tenant to appear in court and notice of this will be served to him by a sheriff at least two weeks before the court appearance. With the notice served, the magistrate can then go about issuing a full eviction order,” he says.
“The tenant may then delay his court appearance by claiming he has to be away on business, is sick or has not yet found a lawyer – 101 reasons have been advanced, but in most cases he will eventually have his day in court.”
Here, by claiming that he is very difficult financial position, for example has lost his job or has other serious problems, Smyth says the tenant may be able to cajole the magistrate into giving a further extension to his occupancy period. In most cases this will be limited to another 30 days.
“If then he is still on the premises after that period, a sheriff is entitled to evict him by force and put his goods on the pavement or in the sheriff’s store,” he says.
“Fortunately, this drastic action happens only in a small minority of cases, but nevertheless, the endless delays involved always prove detrimental to the landlord.”
Smyth says the whole process can take three months, but with a really slippery tenant it might take as much as six months.
“This obviously involves considerable loss of income to the landlord, and it is particularly worrying if he is using the rent to pay a bond on the property,” he says.
To avoid the delays and loss of revenue, Smyth says the landlord must – at the outset – employ a rental agent fully conversant with the checking process.
“Credit, previous landlord and employment checks will in 95% of cases reveal whether the tenant is reliable or not, and any landlord who skimps on this necessary process is asking for trouble,” says Smyth.
Article source: Property 24