Real Estate Investor Magazine South Africa April 2016 | Page 26

MANAGING

Keep your Rental Income

Flowing Freely
BY SIMON DIPPENAAR

Is a formal lease necessary?

A written lease is not essential for your agreement
to be binding, but it can save a lot of hassle later on
and prevent disputes over ‘who said what?’ Putting
everything in writing will clarify the terms and
conditions of the rental agreement and ensure you
have captured all the minutiae that can lead to conflict
if not addressed at the outset. Are pets allowed? Can
your tenant let the spare room for cash? What date in
the month should the rent be paid? A written lease
spells everything out so there is no doubt on either
side. And if your tenant requests a written lease, you
must comply.

What information should be included on a
written lease?
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•
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Your name and your tenant’s name
Your postal address
Your tenant’s postal address
The address of the property being leased
The agreed rent, the amount of increase and when
it may increase (e.g. by 10% at annual renewal)
and the frequency of payment (monthly, quarterly,
etc.)
• The amount of any deposit
• What each party is responsible for, e.g. utilities,
maintenance, etc. (usually, tenants pays for
charges related to things they use, such as water
and electricity, and landlords pays for charges
related to the property, such as rates)
• The notice period for quitting the property
(applicable to both parties) and the conditions
under which you can end the agreement early (for
example, if specific maintenance is not done, or if
the tenant is in arrears with the rent)
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MARCH 2016 SA Real Estate Investor

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A list of defects drawn up during a joint inspection
when the tenant moves in. This should be signed
by both parties and attached to the lease

A deposit is your insurance
against your tenant defaulting
on the rent or damaging your
property beyond normal wear
and tear.
How does a background check work?

You should always ask prospective tenants for
references. While it is normal to obtain a reference
from the current tenant, it can also be helpful to
speak to previous landlords, in case the current
landlord gives a good reference simply to get rid of
an undesirable tenant. You should also request a letter
from the tenant’s employer to verify his employment
status and income.

What about a deposit?

A deposit is your insurance against your tenant
defaulting on the rent or damaging your property
beyond normal wear and tear. A deposit must be put
in an interest-bearing account for the duration of
the tenancy and given back to your tenant, plus the
interest it has earned, when the tenant moves out. But
the deposit can legally be retained and used to pay for
repairs or to cover the money owed to you in the event
of non-payment of rent.

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