Going through a list of our files the other day, I realised that our firm dealt with 99 eviction matters in the last year.
Some instructions related to residential evictions, some related to farms. The majority of our instructions relate to commercial property. I’ve seen commercial property management strategies that work, and I’ve seen strategies flop. One of our clients has reduced their tenant default rate* to one percent, while another company we worked with has a default rate ten times that, at ten percent.
What sets the successful property managers apart from the less successful ones? I think it is the following:
- Get a comprehensive lease signed, every time
A decent lease will record the details of the parties and the property, their obligations and what needs to happen when things go wrong. A comprehensive lease will be lengthy (at least 30 pages) and give rights and remedies relating to every aspect of the landlord/tenant relationship. With a comprehensive lease agreement in place, most disputes are solved simply by referring to the lease. It is also strongly recommended that the lease be reviewed from time to time.
- Take a deposit and increase it annually
The security deposit is fundamental to the landlord/tenant relationship. Without it, the landlord is exposed. A deposit equal to 6 weeks’ rent is normal for unfurnished property. If the property is furnished, fully equipped or “kitted-out”, then the landlord should ask for 8 weeks cover. Landlords should bear in mind that inflation and annual rental increases will erode the deposit over time.
- Get bad tenants out, quickly
As frustrating as it might be to write off arrear rent, it is sometimes the lesser of two evils. When tenants fall two or more months behind on rent, they must be removed as soon as possible. The first priority must be to stop the bleeding. Landlords may want to offer to write off a portion of the arrears on condition that the tenant vacate immediately. Once vacant possession has been restored, the property can be re-let and the erstwhile tenants sued for the remaining arrears.
- Be firm and fair
The best schools have strict headmasters. A property manager, like a headmaster, must have a firm but fair hand. Insist on prompt payment, keep tenants and service providers to their word and remember that everyone deserves a second chance, but not a third.
- Don’t cut corners
From time to time, we are offered terms where we will only get paid when the client gets paid, or where we are asked to agree to a limit of R5 000 in legal fees per instruction, regardless of whether we need to take the matter to the supreme court of appeals.
We understand that times are tough, but we are attorneys, not financiers. We don’t fund litigation. My view is that there is a correlation between companies which have less than favourable default rates and those who seek unrealistic deals from service providers. “The bitterness of poor quality remains long after the sweetness of low price.”
For quality service and expert advice on commercial evictions, contact our offices.
*Default rate, in the sense that it is used here, means “a percentage of the total amount in rent due to the landlord in respect of all properties”. The company with a default rate of 10% owns 300 units at an average rental per unit of R7 000 per month. Of these, 30 tenants are in arrears. At an average monthly lease of R7 000 per month, that equals R210 000 in lost income monthly.