Real Estate Investor Magazine South Africa Real Estate Investor Magazine - June 2017 | Page 28

MANAGING
Junk Status
Dodging Junk Tenants
C
onsumers are feeling the chill of the current
economic climate. What effect does this have
on the rental market? Over that past two to
three years, TPN reports have indicated a steady
decline of tenants in good standing. In the first
quarter of this year, we have 82.77% tenants in good
standing, compared to 84.27% in the first quarter of
2015.
On the one hand, tenants are having sleepless
nights about meeting their financial obligations,
while on the other we have nervous owners—with
non-paying tenants, possibly reluctant to vacate. The
challenge, here, is to find a sensible balance amidst
the panic, to keep the rental market alive and well.
Communication is Key
Communication between the parties is the most
important aspect in all of this, paired with mutually
reasonable and realistic expectations. In cases where
a tenant approaches the landlord—requesting early
cancellation of a lease agreement when he cannot
afford his rent—only for the landlord to demand full
rental payment for the remainder of the lease period,
the tenant will rather remain in occupation of the
property.
The tenant will still be unable to pay rent but, in
this case, there is an added element of spite towards
the landlord, possibly leading to a delay in eviction.
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JUNE 2017 SA Real Estate Investor
The cost of an eviction, loss of income during illegal
occupation, and damage to the property would exceed
the potential losses the landlord would have suffered
were he to accept an early lease cancellation and
subsequent vacant occupation.
Dealing with the Problem
In many cases, tenants would rather avoid paying
rent than request early cancellation of their lease. The
only legal option the landlord would have in these
situations, would be to seek an eviction order against
the tenant. Lately, we do find that more eviction
applications are opposed, with only one objective: to
delay the eviction.
The only way a landlord can mitigate damages in
this case is to follow the correct process—in terms
of applicable legislation—from the start, and act
immediately on the first default. The first step in
this process would be to place the tenant on terms,
by sending a correctly-worded letter, demanding the
tenant to remedy the breach of the lease agreement.
The tenant’s failure to remedy the breach leads to
cancelation, placing the tenant in illegal occupation.
At this juncture, attorneys should be instructed to
obtain an eviction order.
RESOURCES
SSLR Incorporated
www.reimag.co.za