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Landlords: Check would-be tenants

07 Jun 2012

South African landlords are urged to protect themselves by thoroughly considering the financial background and affordability of prospective tenants.

A reference check with their previous landlord helps you find out if they paid their rent on time and kept the property in good condition, says Francois Venter, a director of Jawitz Properties

This is according to Francois Venter, a director of Jawitz Properties who says a full credit check gives insight into how tenants manage their financial affairs.

A reference check with their previous landlord helps you find out if they paid their rent on time and kept the property in good condition, he says.

Venter notes that the latest Rental Payment Monitor from the Tenant Profile Network reports that 32 percent of tenants pay their rent late.

The first quarter of 2012 saw only 68 percent of tenants pay their rent promptly, while 8 percent of tenants made a partial payment, 13 percent paid late and 11 percent did not pay at all.

According to the report, in the under R3 000 per month rental bracket just 58 percent of tenants are paying on time, with 72 percent of tenants paying on time in the R3 000 to R7 000 per month rental bracket.

In the R7 000 to R12 000 per month rental bracket, 71 percent of tenants are paying on time, while in the R12 000 plus per month rental bracket only 61 percent pay their rent on time.

Read more details about the report here.

In today’s economy people are struggling to pay their bills and many may incur a black mark against their names.

Impaired credit records are common, with 46.2 percent of consumers considered to have such records, he says.  

Venter says it is essential to get employment confirmation and an income check from a prospective tenant’s current employer.

“A general rule is that the rental amount should be no more than 30 percent of the tenant’s gross income.”

If a tenant’s credit check comes up with any questionable results, Venter advises that a larger deposit or more than the first month’s rent be taken upfront, or perhaps agree on a shorter lease period.

In the event that prospective tenants are employed on a contract basis, the lease agreement must be aligned to the employment contract.

For self-employed individuals and companies, it is vital to obtain audited financial statements from a registered accountant.

He strongly advises that landlords re-check their tenants credit records, employment status and proof of income each year when their leases are renewed, as people’s financial positions can change rapidly in the current market.

Some tenants with an unfavourable financial history have been known to try to cover their tracks.

He notes that the report reveals that more and more such tenants are targeting private landlords and submitting fraudulent applications in the form of falsified identity documents, or false proof of payment among other scams such as applying for a residence in another family member’s name, or submitting altered utilities bills.

If a tenant’s credit check comes up with any questionable results, Venter advises that a larger deposit or more than the first month’s rent be taken upfront, or perhaps agree on a shorter lease period. 

Landlords can also opt to use a rental agency which, as part of their service, will do thorough background checks before a tenant signs a lease or moves in.

“Landlords should also be realistic and anticipate that tenants with perfect records are hard to find.”

With the help of a good rental agency, it’s possible to manage these risks, which will not only benefit a landlord financially in the long run, but also deliver some peace of mind, he says.

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