PROPERTY INVESTMENT / Dealing with defaulting tenants

[QUINN]

This is how to deal with defaulters

Residential rental agents and property owners must act swiftly against defaulting tenants in order to avoid big pitfalls.

It is vital to follow due procedure and evict the tenant within the first month after the defaulting has occurred to avoid a time-consuming eviction process.

According to new figures released by Tenant Profile Network (TPN), a credit bureau that monitors 75,000 tenants monthly across SA through 3,500 rental agencies, 19% of tenants haven't paid their rent in the first quarter of 2009, compared with 12% last year.

Andrew Schaefer, managing director of the national manager Trafalgar, says the sharp rise is worrying when seen in context of the current economic climate.

Trafalgar manages a portfolio of 12,000 units, mainly in the big metropolitan areas. This forms part of TPN's survey.

He says the stringent management of tenants is crucial at this stage to avoid long legal processes and Trafalgar have been fairly successful at evicting defaulting tenants within the first month. In such instances the deposit will cover the arrears.

Michelle Dickens, managing director of TPN, says it is important to establish whether the tenant has an acceptable credit profile and is able to pay his monthly rent.
"In my practice I screen all potential tenants through all major credit reporting agencies as well as TPN"

A written rental agreement outlining the role and obligations of the tenant, owner and agent, will then be drawn up, she says. The tenant has to be informed of when the rent is due, as well which steps will be taken when defaulting occurs.

She says agents and owners have to provide their tenants with a monthly statement indicating the rental payment. The most cost-efficient methods are email or sms. "This will encourage the tenant to pay."

She says that as the arrears grows, it becomes increasingly difficult to get the money from defaulting tenants. "If the rent is supposed to be paid on the first day of the month and it isn't in the agent or owner's account by the second day, the tenant should be phoned immediately to establish whether there is a problem and arrangements need to be made for a payment date."

The second step is to give them notice. The agent or property owner cannot cancel the rental agreement if this step hasn't been done. She says most agents send notices on the fourth day of the month.

If the tenant still doesn't pay or make an arrangement through a signed debt admission, the agent or owner can then cancel the rental agreement and inform the tenant that he has to vacate the premises.

He could also be informed that his name will go onto a blacklist.
"SEE TREAD ON GETTING PAID"

The agent or owner has the right to - 20 working days after the rental agreement has been canceled - put the tenant's name on a blacklist at TPN or other credit bureaus.

If the tenant doesn't evict the property after this process has been followed, it is time to approach a lawyer who specialises in evictions to obtain a court order against the tenant. "The good news is that if the agent or owner has followed this process, he rarely needs the services of a lawyer."

Raal Nordin, executive director of Only Rentals, which manages 5,000 units across SA that form part of the TPN survey, says it is important in the current economic climate that owners accommodate tenants. "With the new rental agreement we include an escalation of only 5% for 2010," he says. – Elma Kloppers, Sake24

[Debbiedle]

Quote Quinn The agent or owner has the right to - 20 working days after the rental agreement has been canceled - put the tenant's name on a blacklist at TPN or other credit bureaus.

Wow! That is very quick - I also see it as a catch 22 because once you list this tenant, they will not be able to get another rental property even IF they ARE looking. So won't it be working in their favour?

[Sieg]

One has to tread very wearily with regard to the attempt to evict a residential tenant. These beings now have all sorts of "rights" and they are entitled to "notices" of all kind. For example, one has to look at the onerous provisions which owners have to comply with in terms of the Prevention of Illegal Eviction Act and other pieces of acts of parliament.

There is one way which has worked very well for a client of mine who wanted a very troublesome tenant of Nigerian / Ghanian / somewhere in Africa extraction to be evicted. The client simply lodged a complaint with the Housing Tribunal. The chairperson told the tenant in no uncertain terms where he must go and issued an "order" for eviction. The best part of this was that he told the tenant that if the tenant did not obey, then the owner could lodge a complaint with the police and the police would then enforce the order and the tenant could face a jail sentence! That really shook the tenant up. He was out real soon after that. [and the entire process was free for my client!]

See for example http://www.capegateway.gov.za/Text/2..._print_web.pdf

Sieg

[garthu]

One has to tread very wearily with regard to the attempt to evict a residential tenant

Hear you! I know there was a case where the owner was jailed, he'd cut services. Getting pushy is one thing, but be weary (lets face it same pushy methods i use - but be weary!) but it could back fire. Another attorney told me to be cautious of black mail charges being brought against me on the "get out or else"!! All sorts of laws and reference to contract have to be in those warnings and demands..
Not to forget also, debt collection requires a registered collector.....

Crazy world we live in