Real Estate Investor Magazine South Africa December / Jan 2016 | Page 30

RENTING

Buy-To-Let

Risk Management
Investigating the Nuances of the Agent/Tenant Relationship
BY GERT VAN STADEN

G

iven that the sky-rocketing cost of electricity
in South Africa, compounded by increases
in other costs related to property ownership,
including municipal services such as water, refuse
removal and sanitation, buy-to-let property owners
must manage the growing risk they face with regard
to utility costs.
Legally the owner of a property is responsible for
the payment of utilities, including water and electricity
consumption. The risk, of course, for buy-to-let
investors is that the tenant does not pay the utilities
bill, leaving the investor liable for the account. And
the risk of late payment or non-payment of utilities

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DEC/JAN 2016 SA Real Estate Investor

is dramatically increased as utility costs escalate –
increasing the possibility of tenants running up water
and electricity accounts they cannot pay.
Disputes, late payments and non-payments of
utilities pose a significant risk and a cash flow burden
on the property owner. Fortunately there are ways to
mitigate this risk.
The agreement
The starting point to managing this risk is to formally
stipulate the responsibility of the tenant with regard to
utilities costs in the lease agreement. A specific deposit
for utilities should also be collected.
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