Don't let your guard down when letting
Investing in a rental property can go horribly wrong for a landlord if would-be tenants aren't vetted properly and turn out to be late or non-payers, or trash the property or, worst of all, turn out to be professional squatters.
"A person wouldn't dream of handing the keys to their car to a stranger, yet they allow their investment flat to be rented to someone without making sure that they've been properly checked out," says Michelle Dickens, MD of TPN, a credit bureau that specialises in vetting tenants for rental properties. "That's mind-boggling to me."
A former rental agent, Dickens founded TPN in 2000, as a way of sharing information about delinquent tenants.
And it isn't enough for a landlord to pay a rental agent to take care of their property and leave them to get on with it, no questions asked, Dickens says.
"It's not uncommon for an agent to tell a landlord that they've done checks when they actually haven't," she warns. "Or for a check to be done on only the person who signed the application form and not the person who signed the lease.
"It is essential that landlords and agents get consent from applicants to pull the credit records of all adults who will live on the property."
'Couldn't afford it'
Some couples deliberately keep one of their credit records clean, Dickens says, so the wife, for example, will sign the application form for a rental unit, and be approved, based on her clean record, and then the delinquent husband will sign the lease.
Neeran Naidoo of Hout Bay has first-hand experience of delinquent tenants.
Earlier this year he asked his preferred rental agents to advertise a cottage on his property for rent.
An agent from Soukop Property Group responded, saying the agency had a potential tenant, and an eight-month rental agreement was duly signed, with Soukop handling the vetting and signing process for an upfront fee of R15800.
The couple moved in in March, and things went wrong almost from the start.
"I agreed to one dog, but they came with two," Naidoo says, and the first month's rental was paid late.
"The lease provides for two months' rental to be paid as a deposit, and it was agreed that the tenants would pay the second deposit at the end of April, but they couldn't afford it.
"And they didn't pay rent in May as they couldn't afford that either."
On top of that, the carpets, curtains, blinds, deck and other parts of the cottage were soiled or damaged, mainly by the dogs, Naidoo says.
He insisted that the tenants leave immediately, waiving any penalties, against Soukop's advice to let them stay until new tenants were found.
And then began a long, acrimonious dispute with Soukop to recover the fee he had paid them and the estimated R10000 he spent on restoring the cottage.
Soukop administrator Gemma Soukop says the agency offered to pay back the commission of R15800 in June on condition that Naidoo stopped his "smear campaign", but he refused the offer.
Before the tenants moved out, Naidoo asked Soukop for the tenants' reference checks, and that's how he discovered that one of them, a Mr E - partner to the man who signed the lease - had seven judgments brought against him by creditors and "questionable financials".
But he recently made an even more startling discovery, on contacting credit bureau TPN: Soukop only requested a credit check a few weeks after the tenants had moved in.
Soukop says the agent who handled the rental - a trainee - told her that the TPN report had been done, and that the tenant who signed the lease had an excellent rating.
"When I requested this from him after he left the company, he said he had deleted everything pertaining to Soukop from his laptop.
"It was at this point that I pulled a report for our file," she says.
"Mr Naidoo continuously refers to Mr E (the partner) and his credit report. Mr E was not party to the lease agreement, and therefore is in no way liable, nor is his credit rating relevant."
Entitled to have sight
Naidoo argues that Mr E co-signed the application and an assessment of the couple's ability to pay the rent was based on their joint income.
Asked whether she thought landlords should ask their rental agency what verification checks they conduct on prospective tenants, and for a report on what information was obtained, Soukop says the Protection of Personal Information Act prohibited the agency from sharing any confidential information with a landlord or third party "without the express written consent of the tenant".
She says: "We only request this if the landlord requests this information."
But Dickens says the act isn't yet in force, and even if it was, "the lease agreement is between the tenant and the landlord".
She adds: "The agent is acting on the mandate of the landlord, who is entitled to have sight of the application and all supporting documents, with the applicant's consent. And I'd strongly advise them to ask."