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General Tips for Renters

If you are looking to rent a residential property, make sure that you know all the pitfalls before you sign on the dotted line. The best-prepared tenants get the best properties at the best price. Compare your new home search to the hunt for a new job. Here are some of the major things you should look out for to avoid getting into a legal or financial tangle during the rental transaction.

Get prepared!

• Ensure that your credit record is in good shape, and obtain the current contact information and permission of any referees ahead of time.

• Compile all the information and paperwork needed to complete a rental application, including a list of previous addresses, bank account details, ID document, employer information and recent payslips.

• Be prepared to pay a deposit, usually equivalent to a full month’s rent, and ensure that you have the funds to cover any water and electricity supply connection fees that are required.

Selecting an Estate Agent

You may decide that you need an agent to service you. Find one who is familiar with the location and type of property you have in mind. Make sure the agent is a member of the Institute of Estate Agents of South Africa (IEASA) and EAAB (Estate Agency Affairs Board). Discuss your requirements with them and be specific. This will allow them to advise and service you in a professional manner.

Factors to consider about your Property

Decide beforehand on a few likely locations that you'd like to live in. Take into account things like the distance to work places, schools, transportation and places that you visit frequently with your lifestyle in mind.

• Location - Is the area quiet or noisy? What types of people live in the surrounding area? Do you feel comfortable there?

• Are the available transport links appropriate for your needs? How close is the property to the local shops, supermarkets or schools?

• Facilities - Would you like the advantage of a swimming pool, tennis courts and other condominium type facilities? Or, would you prefer to join a recreation club and enjoy a wider variety of leisure?

• Condition - Does the property look to be in good condition? A badly maintained property can often reveal an illusive landlord and future problems. If the property is in a poor condition but you still wish to rent it, use its faults to negotiate a lower rent.

• Size - How large a home do you need? How many bedrooms do you need? Do you need a private enclosed space or a garden for your children to play?

• Duration of Lease - Normally landlords prefer the lease period to be at least 12 months or more.

• Furnishing of the house - Do you need the house to be fully furnished, partially furnished or unfurnished?

• Budget - Once you've decided on a location and size of home that you'd like, think about how much you'll be willing to spend. Bear in mind other monthly expenses that come with renting a home (eg. insurance, utilities and telephone charges). Will the property be cheap to heat and light? Can you really afford it?

Ownership

Always ensure that the Landlord is the actual owner of the property. You may wish to request for proof when you are making the rental.

Viewing Etiquette

A home seeker who impresses a landlord as the sort of person who will care for the property is much more likely to be given a long lease and may even be prepared to lower the rent, or at least defer a rent increase in order to keep a good tenant. Be punctual for viewing appointments. Dress casually but smartly.

Once you have decided on the type of home to rent, your agent will arrange for you to view all available homes matching your criteria. Bring a small notebook and take notes for later comparison. Put down the positive and negative points about the property. This will help you make an informed decision later.

Before you enter any prospective home, always take note of the surrounding areas. Don't forget, you can always redecorate the interior of a home but there's no way you can change the surroundings! Also, don't be distracted by a home that looks just the way you would have liked, get carried away and forget to check for things like cracked tiles and fittings that don't work.

Avoid making any negative comments if the landlord is present to avoid offending them. Always try and make a friend. Remember, you may decide to rent their home after all!

Making an Offer

Once you find a home that you like, discuss with your agent with regards to the asking and market rent for the property. Compare that property with those that you have viewed. Is the property really worth the rent being asked for it? Refer to your notes about the property. Your agent should be able to help you to decide on a fair rent.

Remember, you're not the only one looking around for a home. By all means don't rush into making a hasty decision but, if you don't decide soon, some one else will! And above all, always remember that no matter how many homes you look at, there's no way they're going to be 100% perfect. It's best to have an open mind and be prepared to adjust your expectations a little.

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Becoming a Landlord

Many people, tempted by the great returns in the property market, have decided to enter this booming arena as a landlord.

Investors have either bought a house with the intention of renting it out or have decided to let a garden cottage or flatlet.

In theory, becoming a landlord sounds great.

It is a comforting feeling owning an appreciating asset like property and some investors prefer this feeling – to actually touch the walls and walk around your asset is just not the same as seeing how many shares you own on a computer screen.

The idea of rental income streaming in each month speaks for itself and tenants that have swapped roles and become landlords will relish the fact that they are not paying off someone else’s mortgage.

Deciding to become a landlord is the easy part.

The tricky part is finding tenants, collecting the monthly rent, holding the security deposit, deciding on who takes care of any maintenance issues, and being responsible for the property…the list is endless.

Despite the effort involved, many landlords are happy with their investments and the extra income is a welcome lining to an otherwise empty pocket. But, it is not a walk in the park and landlords have to do their homework.

Anton de Leeuw, CEO of YDL property educationalists, warns prospective landlords to stay close to home.

He says a rented property will need attention at some stage and it is always more difficult to arrange anything from a distance.

There are three ways to become a landlord:

• You can buy a property and then hand over all the responsibility to a property management company.

• You can buy a property, go it alone and be a hands-on landlord, seeing to the letting and maintenance yourself.

• You can rent out part of the property that you are currently living in.

If you delegate the responsibility, you won’t have to deal with any hassles but this service will cost you.

Moreover, De Leeuw adds, there is chance a reputable property manager will not tend to emergencies with the same interest as you would.

If you decide to become a hands-on landlord, you earn all the rent but you could end up spending a lot of your time and energy on maintaining the property.

If you rent out part of your home, the tenant can either make or break the arrangement – an unruly tenant under your roof could make life extremely unpleasant.

Once the property is available to rent out and you’ve decided to go the hands-on approach, the first port of call is finding tenants. This can be done through advertising or even better, through word of mouth.

Before interviewing tenants, it is a good idea to compile a set of criteria or standards to help you decide who would be a good tenant. Explain this to people visiting the property and not rush through the process.

Screening potential tenants can be time consuming but is well worth it in the long run.

This can include asking for a copy of the tenant’s ID, doing a credit check, verifying past employment and contacting previous landlords.

The next step is drawing up a comprehensive lease agreement. Standard lease agreements are freely available on most property websites, from newsagents and from the Estate Agency Affairs Boards.

“If you own more than one unit and have a large rental portfolio, it is advisable to ask a lawyer to draft a tailor-made lease agreement,” says De Leeuw.

The landlord must remember to pay stamp duty by affixing stamps to the lease agreement, he adds.

It is advisable to ask the tenant to put down a deposit of at least one month’s rent. This is to be kept in an interest-bearing account for the benefit of the tenant.

The lease should cover aspects such as the rent amount, notice period and whether the tenants are allowed to keep pets, change the décor or smoke.

One of the most important issues to cover in a lease is who is liable to pay for municipal services.

In terms of a local government act, if municipal accounts, incurred by the tenant, have not been paid for two years, the owner (landlord) of the property is liable for payment.

This may put a real dampener on the rosy landlord scenario but De Leeuw says it is not all doom and gloom.

“It becomes an issue only when the owner tries to sell the property,” he says.

This act does not allow the registrar of deeds to transfer a certain property until a rates clearance certificate has been received from the council and obviously this is only issued when all municipal accounts have been paid in full.

He advises landlords to be practical about this and insert a clause into the lease agreement, whereby the tenant will be in breach of the contract if the account is not paid on time.

“Landlords can monitor the costs on a regular basis and in this way the tenant won’t be able to rack up two years worth of unpaid accounts.”

De Leeuw suggests:

• asking the tenant to provide proof of payment each month

• requesting monthly information costs from the local authority

• installing a pre-paid system

• opening the municipal account in the landlord’s name and billing the tenant separately

Many landlords may worry about the Prevention of Illegal Eviction and Unlawful Occupation Act but this is meant mainly to protect illegal squatters and should not affect normal landlord-tenant relationships – provided the agreement between them is clear.

“At all times, a good landlord should be firm but friendly and fair,” adds De Leeuw.
 

Choose your tenants carefully

2005 was the year in which many people became landlords for the first time. Many new property owners may not be aware of the legal requirements or the pitfalls of property ownership and could run a serious risk of financial losses.

“New landlords would do well to talk to experienced letting agents who have a positive track record in their area,” says Mike Spencer of Platinum Global.

Landlords are responsible for ensuring that properties are inspected when the new tenants move in, and that the tenant is entitled to receive a copy of the inspection report. It should be done together with the old and new tenant and the old tenants deposit must be repaid within 7 days. If there are problems landlords are given a little longer, but in the event of major damage getting proper quotations could be a problem. Tenants are entitled to a detailed statement of their deposit refund together with receipts for any deductions.

Landlords should choose their letting agents carefully. It is fashionable for sales agencies to dabble in letting without knowing much about what they are doing. Good estate agents would undertake an ITC credit reference before letting to any tenant and ensure that they can afford the property they are letting. This does not always happen and landlords only find out later how expensive and difficult it is to get rid of unwanted tenants legally. In higher risk properties and those with lower rentals landlords would be well advised to insist that their letting agents take double deposits and that they take immediate action against any defaulting tenants to minimize their losses.

Many letting agents are less than stringent about the date on which rentals must be paid. It would make a significant difference to the landlord if he were to be paid his rental before the interest date on his home loan (usually around the 7th of each month). Estate agencies that insist on tenants paying directly into their trust accounts and on-pay landlords in the same way are a big help in this regard. This helps to maximise the landlord's investment.

Landlords should be aware that they are responsible for their tenant's service accounts (electricity, water etc) both with the municipality and the body corporate. They should insist that their letting agents get proof of payment from their tenants on a regular basis and that no deposits are repaid before this proof has been received.

Far too many letting agents are prepared to let to just anybody, just to be able to show the landlord that their property is let. This results in poor tenants being accepted, disturbance in the complex, unhappy trustees and frequently damage to the unit and loss of rental. Legal costs can be substantial for the landlord. This is a “penny wise, pound foolish” way to let property. Landlords should insist that their letting agents take great care when renting out their properties and only choose approved tenants, to minimise their losses and letting problems.