The paperwork, the pitfalls and other good advice

Friday 23rd of March 2018

The residential property rental market is fast-paced, potentially risky and legislation-heavy. The Know spoke to rentals expert, Dexter Leite from Pam Golding Properties about basic industry requirements, what to expect from agents and pitfalls, that at worst, could lead you into a legal dispute.

Renting out a home is like running a business, but add the onerous contractual and legal obligations for both landlord and tenant and it can get complicated,” says Leite.

Don’t let the documentation catch you out

“Firstly, both parties need to be aware of the available lease options and their terminology. In a nutshell, a Consumer Protection Act (“CPA”) compliant lease is used in most instances. This means that the tenant is a natural person, for example “Mr Jones” and the transaction is concluded in the landlord’s ordinary course of business for consideration, as referred to in the CPA.

“A Non-CPA compliant lease is used where the tenant is a juristic entity with an asset value or annual turnover of   R2 million or more at the time of the transaction. The differences between these two leases are vast and can materially impact on both the landlord and tenant’s rights and obligations. If a Non CPA compliant lease is used in instances where a CPA compliant lease should have been entered into, the tenant will still be able to invoke their rights under the CPA, despite provisions to the contrary in the Non-CPA compliant lease. The landlord’s estate agent should be able to assist clients in their selection of an appropriate lease agreement.

Managed and non-managed lease agreements

Confident that you have the correct documentation in hand, the next step is whether to enter into a managed or ‘tenant procurement only’ lease agreement. The latter is when a rental agent procures the tenant by advertising the property, arranges viewings, completes the necessary vetting and credit checking requirements, negotiates between the parties, drafts the lease for signature – and then hands over future business to the landlord and tenant to deal directly with one another. In this case, the landlord is usually responsible for conducting the ingoing inspection, the ongoing maintenance of the property for the duration of the lease, and also holds the deposit.

If the landlord sees the value in retaining the agent to also manage the day to day running of the property, this option is available to the landlord by most agencies. In this case the agent manages both the ingoing and outgoing inspections, holds the deposit in the agency’s trust account and deals with the ongoing repairs, maintenance and other requests related to the property from both parties for the lease period. In this case, the agency also usually manages the monthly utility accounts, sends statements to tenants for payment and pays the rates and levies on behalf of the landlord.

According to Leite, a managed lease scenario considerably reduces the landlord’s involvement as well as the associated contractual and legislative risk.

“One of the legal requirements is the arduous and time-consuming task of carrying out and recording ingoing and outgoing property inspections. It is vital that every defect in the property is appropriately recorded in writing, while supporting photographs of the property’s defects and overall condition are also helpful.”

The ‘fair wear and tear’ wars

The somewhat subjective, and often contentious, issue of ‘fair wear and tear’ is another instance where it is helpful to have professional third party assistance and advice through a managed lease scenario. Here, it is important to note that damage and utility deposits are intended solely for damages and financial obligations that the tenant has in terms of the lease upon termination.

“While the Rental Housing Act regulates this aspect, a rule of thumb is that the landlord should factor a value equivalent to two months’ rent per year for maintenance and repairs, depending on the overall condition of the property and possible vacancies between tenancies” says Leite.

“For example, carpets have an approximate five to seven year life in a rental property, depending on quality and use, while properties need to be painted every five years or so. A landlord cannot hold a tenant responsible for the full cost of replacing a damaged or worn carpet, where fair wear and tear over a number of years has also contributed to its overall poor condition.”

Choose a legislation-savvy agent

“You’ll know a good agent by how active they are in the area and by how much industry and area knowledge they have. If in doubt, ask for references. Speak to the agent’s manager or principal and ensure that both the agent and the agency they represent, are registered with the Estate Agency Affairs Board and that they hold valid Fidelity Fund Certificates. This is a legal requirement in terms of the Estate Agency Affairs Act of 1976.

“Ensure that your agent is legislation savvy, has administrative backup and is committed to screening tenants. And once you have received a credible rental estimate and are satisfied with the agency’s credentials, mandate an agent of your choice.

“The purpose of a written mandate is to govern the landlord and agent relationship and sets out the obligations for both parties including all the costs involved in the process. It’s really sensible practice for any business relationship.

“It is also essential that your agent has the confidence and knowledge to tactfully and skilfully negotiate and diffuse disputes that may arise and is able to avoid legal action between the parties as far as possible.” says Leite.

Short-term rentals is a 24/7 calling

What about short-term rentals, we asked. According to Leite this is a sphere of the business that requires a specialised approach.

“Holiday rentals are fast-paced. Agents are required to interact with well-travelled international visitors, perform ongoing inspections and ensure that properties remain in tip-top condition. In addition, a fully managed booking includes: providing access to cleaning staff; securing vacant properties; topping up internet and electricity; purchasing cleaning products; providing welcome packs; trouble shooting DSTV and cheerfully greeting guests at all times of the day and night. Appointing the right agent for all of this is obviously critical,” says Leite.

If you would like a market-related rental estimate on your rental property or require the services of an experienced and professional agent to find you, or manage a property, contact Pam Golding Properties for information.

Pic:  This grand family home in Bishopscourt, Cape Town, is available to rent for R100 000 per month through Sharon van Rooyen at Pam Golding Properties. Click here, to find out why you’ll love it.

Posted by Niki Jackson