Words: Anne Schauffer | Image: iStock
We all tend to go on that “gut” feel, but when it comes to choosing a tenant, that’s not enough. As tough as it can be, you need to protect yourself if your tenant is retrenched, their relationship falls apart and their partner was paying a portion of the rent, and a host of other reasons.
DIY or rental agent?
You need a watertight agreement that will stand up to the most vigorous legal scrutiny. Of course, you can draw up your own lease agreement or buy one off the shelf, but as Myles Wakefield, CEO, Wakefields Real Estate, says, “There are so many different bodies regulating the letting and management of residential property. You need to have extremely good knowledge of all of the laws governing residential letting in this country. If the lease agreement is not fully compliant with these bodies, the landlord is on shaky ground from the start.”
In addition, an experienced agent has heard it all before, so heart-wrenching stories which might touch you, simply ring alarm bells for a seasoned rental agent.
What about the cost of using an agency as opposed to DIY? Charges and services vary from agency to agency, and your circumstances will dictate\ your choice. If you’re living far from your investment apartment, or prefer not to be involved, it may be wise to outsource all or part of the function.
Where to begin
You need a strong application form. Fill it out in detail, with the tenant’s current employment situation, net income (they need to have a net income three times the rent in order to qualify), previous landlords’ details (if any), ID and proof of address. You need proof of all this, as well as any references up front. If they’re foreign, they need to provide a copy of their visa, which must not expire before the end of the proposed tenancy.
The agency/landlord must then conduct a credit check. Myles says, “We use TPN – it’s the only credit bureau globally to specialise in the property industry, and as a result estate agencies, individual landlords and listed property funds use TPN to credit check their tenants.”
All references must be thoroughly checked for legitimacy. If everything checks out, there’s a little more to be done to separate the wheat from the chaff.
Sectional title rules
Defaulting on rent is one thing, but disregard for house rules in a complex or gated estate is another. The tenant must be provided with a copy of the house rules before taking occupation and must read, understand and sign the copy. Attach the copy to the lease agreement.
As long as this has been done, any contravention of the rules will be regarded as a breach of contract – make sure they understand that. Any fines imposed on the landlord by the body corporate can be recouped from the tenant by the landlord. “If the tenant does not remedy the breach within the given timeframe (usually 20 business days), then the landlord can proceed with the eviction process,” says Myles.
Tenant or landlord – who rules?
There’s a myth that tenants have the upper hand, but Peter Mennen of TPN Client Legal Liaison, says that’s not true. “Ultimately, a landlord who approaches the courts where a tenant illegally occupies the property will always find their eviction order is granted. But landlords often delay approaching the courts in the first place because it’s a costly and lengthy process. They try to negotiate their way out of the situation or commit an unfair practice such as disconnecting utilities or locking the tenant out in an attempt to get them to pay or vacate without having to take the legal route. This only exacerbates the legal process from the landlord’s perspective.
“A well-chosen, quality tenant who has had a proper affordability assessment done and who has not undergone a major life change is unlikely to squat when the landlord cancels the lease agreement.”
He says the faster you act on a defaulting tenant by sending a letter of demand and cancelling the lease agreement, the more chance you have of a favourable outcome. “Often, the first letter of demand or the first summons is enough of a jolt for the tenant to get out of the property or settle their rental.”
The last word
The most important thing is to minimise your risk by securing the best possible tenant and to consider taking out some rent guarantee insurance. Bond originator, Ooba, offers a comprehensive product called Ooba Rent Protect worth thinking about.