10 Nov The 7 Deadly Rental Sins
The 7 Deadly Rental Sins
…as committed by landlords, tenants and agents
We are constantly plagued by rental horror stories; nightmare tenants; greedy landlords; lazy agents and countless other woes surrounding the rental industry. Over the last ten years as a rental specialist, I have found a few crucial elements not thoroughly considered by all parties concerned.
Sadly, they are the catalyst for impending disaster. As a landlord, you want your investment protected, and as a tenant you want your deposit looked after and a comfortable place to live. To avoid the frustration of financial loss, stress and damage to your property. Make sure you are not committing these 7 Deadly Rental Sins.
- Poor Screening of Tenants
This is the most wicked of the deadly sins, as poorly screened tenants are incredibly costly in the long run. Find a trustworthy agent to assist you in this area and pay for your tenant to be professionally screened. Never accept tenants on face value, as they are often desperate to find a home and may resort to saying or doing anything to garner your trust. Protect your investment and yourself:
- Complete a thorough credit screening with a recognised credit bureau
- Verify their employment and income (covering at least 3 times the monthly rent)
- Keep a copy of their ID/Visa or Immigration status
- Contact at least the last 2 landlords/agents
- Do a Google or Facebook search to see if they are a good personal fit for your property
- Poorly Structured Leases
With the deadliest of sins being a verbal lease, a close second, is a badly constructed and/or a lease falling foul of the law and does not adequately detail the obligations and rights of both the landlord and the tenant. A lease must to be legally drawn up with clauses in line with current legislation and ensure all parties interests and rights are outlined. Don’t be tempted to buy an over-the-counter-lease at a stationery store. If you cannot afford a legally drawn up lease agreement, you can obtain one for a reasonable fee from various online resources. Apart from the main elements of the lease being the parties, premises, rental amount and dates, other crucial elements must also be included;
- Who is responsible for which repairs and maintenance?
- Who must pay for the upkeep of the garden and servicing of the pool?
- Who must pay for which utilities and how will they be paid?
- What are the House Rules the tenants must follow Sectional Title units?
- How will the lease be renewed on the anniversary of the lease?
- Inadequate Damage Deposits
A critical error made by agents and landlords is taking insufficient damage deposits. Traditionally, a 1 month deposit was the norm, but with tenants under greater financial pressure and reneging on their last month’s rent, 2 months’ deposit is the minimum requirement today. The legal costs on top of lost rental can snowball tremendously so, taking less than a 2 months’ deposit is my 3rd deadly Rental Sin.
The handling of damage deposits is clearly outlined in the Rental Housing Act. The deposit remains the property of the tenants and needs to be deposited in at least a savings account in a financial institution in SA and the interest thereon is to accrue to the tenant. Further, the refunding of the deposit is due by 7 days after the lease expires, if no deductions are made, 14 days if deductions are made and 21 days if the tenant fails to attend an outgoing inspection. A Landlord simply may not benefit financially from the tenant’s deposit and may not contract out of paying interest, it’s the law!
- Rent due by the 7th
A very insidious urban myth often rears its head in rentals where tenants are under the misguided notion that there is a common law ‘grace period’ for the payment of rentals with this being roughly around the 7th. The fact is, no such law or premise in law exists. The lease is the indicator of when the rent is due and failure to pay the rent by such agreed date will render the tenant in breach of the tenancy. This is my 4th Deadly Rental Sin and as Landlord/agent you need to ensure that tenants understand the payment method and due date and the consequent results for late payments.
- Failure to do Inspections and make Record
If there was one Deadly Sin committed by Landlords & Agents alike that causes more dispute than any other, it would be neglecting the Incoming and outgoing inspection required by law, when a lease commences or terminates. Landlords and/or agents must jointly inspect the property at commencement and termination of a lease and make good record of the current state of repair of the property. Many landlords neglect this exercise and pay heavily for it at the termination as deductions will be disallowed by a Rental Housing Tribunal in the absence of good record. I suggest a simple video taken with a digital camera or smartphone which is loaded to YouTube or burnt to disc or photographs that are date stamped at the very minimum. Good record eliminates disputes. At the time of termination when your tenant moves, it is easy to refer to the condition at commencement, so your tenant has an opportunity to restore the property to a similar condition, fair wear and tear aside.
- Failure to plan and execute Maintenance
As a landlord, you are obliged to offer the property you rent in a fit and habitable condition, that does not hinder the reasonable day to day enjoyment of the property. It is prudent as a landlord to ensure you earmark a percentage of your rental income towards maintenance. It will mean you attract good tenants and keep current tenants happy. Often disputes arise when landlords and/or agents neglect necessary works and repairs that may render a property unfit or uninhabitable. Inspections during the lease period are prudent and necessary to stay on top of small niggles that may become big issues later. Wear and tear is inevitable and it is wise to maintain a good state of repair in your rental property. Too many disputes arise where tenants decide to withhold rental because of neglected repairs and maintenance. A clearly defined lease also has bearing on how maintenance is handled.
- Failure to Give Adequate Notice of Breach
Deadly Sin 7 is the failure to efficiently and swiftly advise a tenant in writing of a breach of tenancy. I am often shocked to hear of a tenant 2 or 3 months in arrears, having not been informed by their landlord in writing that they are in breach of their tenancy and failure to pay would mean termination of the lease. Getting a defaulting tenant to perform or vacate requires, swift decisive action. Do not hesitate to notify a tenant of their breach of tenancy by day 3 of the month if rent is due by the 1st. It sets a clear boundary and it means if legal action is necessary that you have already expedited the process so it may escalate to a court of law. The first question a magistrate or judge will ask if the tenant was adequately given notice. If this was not done as prescribed in the Rental Housing Act or Consumer Protection Act, most courts will request this done before action may be brought.