Val­ued ten­ants should be nur­tured, says ex­pert

Weekend Argus (Saturday Edition) - - PROPERTY - BONNY FOURIE

TEN­ANTS who pay a monthly rental in­clu­sive of util­ity charges may not es­cape this month’s VAT in­crease as land­lords are obliged to pass on th­ese es­ca­la­tions to their ten­ants.

Con­sid­er­ing the end of 2017 saw more ten­ants pay­ing their rent late, they will, like most con­sumers, find them­selves un­der in­creas­ing pres­sure in the com­ing months.

The lat­est TPN Rental Mon­i­tor, which looked at data for the last quar­ter of 2017, found there was a “no­tice­able shift” in the num­bers of ten­ants who went from pay­ing on time to pay­ing late or in given grace pe­ri­ods. The al­most 1% de­cline is, ac­cord­ing to Michelle Dick­ens, TPN man­ag­ing di­rec­tor, “con­cern­ing”, es­pe­cially when con­sid­er­ing the VAT in­crease was not yet in ef­fect.

“Not­with­stand­ing that res­i­den­tial lease agree­ments are VAT ex­empt, there are other rental charges which will at­tract the in­creased 15% VAT rate. Charges such as elec­tric­ity, wa­ter, sew­er­age and refuse re­moval will go up and land­lords will need to pass the cost to the ten­ant. Ul­ti­mately, the ten­ant’s monthly bill goes up. The land­lord is no bet­ter off and is sim­ply a con­duit to col­lect the in­creased VAT.”

Dick­ens says land­lords should feel com­forted by the fact that ten­ants con­tinue to pri­ori­tise their monthly rental pay­ment ahead of all other credit com­mit­ments, bar­ring mort­gage re­pay­ments. Na­tion­ally, the fig­ures show 60.6% of con­sumers’ over­all credit pro­files are in good stand­ing, while 83.35% of ten­ants are in good stand­ing with their rent. This in­cludes those who pay on time, late or in grace pe­ri­ods.

The West­ern Cape still leads the other prov­inces with 89.67% of ten­ants in good stand­ing. Only 7.66% made par­tial pay­ments and 2.68% did not pay at all.

TPN’s fig­ures also show the aver­age ba­sic rent in the West­ern Cape at Q4 was the high­est in the coun­try, at about R8 300, com­pared to the na­tional aver­age of R6 300. Fur­ther­more, its es­ca­la­tion in Q4 was 8.23%. The na­tional aver­age in­crease was 1.56%.

“Ten­ants on aver­age pay R6 368 a month ba­sic rent, which does not take into ac­count ad­di­tional charges such as elec­tric­ity, wa­ter, refuse re­moval and sew­er­age, where dou­ble-digit es­ca­la­tion, and the lat­est VAT in­crease, will con­tinue to sti­fle the land­lord’s abil­ity to in­crease rent,” Dick­ens says.

An­nual rental in­creases are, un­for­tu­nately for ten­ants, a fact of life as land­lords need to cover ex­penses and pro­tect their in­vest­ments. But this does not mean land­lords can just “pick a num­ber”, says Jac­qui Sav­age, na­tional rentals busi­ness de­vel­op­ment man­ager for the Raw­son Prop­erty Group. There is also a com­mon mis­per­cep­tion that the stan- dard in­crease is 10%.

“There are no leg­is­lated min­i­mums, max­i­mums, or stan­dard fig­ures. An­nual es­ca­la­tion is set on a case-by-case ba­sis. The Rental Hous­ing Tri­bunal is clear that in­creases must be rea­son­able, which means land­lords need to be able to back their es­ca­la­tion fig­ures with prop­erly re­searched in­dus­try trends.”

Es­ca­la­tion trends also vary by re­gion, sub­urb, prop­erty type and sup­ply-and-de­mand sta­tis­tics. Sav­age says land­lords also need to take their par­tic­u­lar ten­ants into ac­count. Good ten­ants who look af­ter the prop­erty, pay on time and com­mu­ni­cate well with man­ag­ing land­lords or agents are “worth their weight in gold” so a slightly lower es­ca­la­tion rate is worth con­sid­er­ing.

This, says Sav­age, is the key to a ten­ant’s bar­gain­ing power dur­ing ne­go­ti­a­tions.

“You want to be the kind of ten­ant your land­lord doesn’t want to lose.

“That means pay­ing your rent on time, and be­ing proac­tive when it comes to small main­te­nance chores and mi­nor fixes.”

Sav­age says los­ing a ten­ant be­cause of un­rea­son­able rental es­ca­la­tion is a real pos­si­bil­ity, even in tra­di­tion­ally high de­mand ar­eas like the West­ern Cape.

PIC­TURE: PIX­ABAY

The West­ern Cape has the high­est aver­age rental rates in the coun­try, and its ten­ants are still the best per­form­ing when it comes to pay­ing on time.

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