- Financial challenges
- Repayment structure
- Restructure lease agreement
- Tough relationship
- Open line of communication
An unfortunate trend that the real estate market has been experiencing this year is late rental payments from tenants or tenants simply defaulting on payments.
These statistics have been confirmed by most reputable agencies and further shows that only 72% of South African tenants are able to pay their rent in full and on time every month. The remaining 28% are either paying very late into the next month of defaulting on their lease agreement altogether.
Financial difficulty is a situation that many people find themselves in and it is often out of their control.
In the current economic climate, retrenchments happen sooner than you might think.
When a tenant struggles to pay the rent, they are usually in denial about the fact, avoids the topic with their landlord, and ends up in a very tight situation.
If you are a good quality tenant, your landlord is bound to hold onto you but if important information like this is withheld, it could spell serious trouble.
The best solution would be to play open cards with your landlord and be upfront with them. They might just understand your financial situation and might suggest a new payment structure.
If the landlord or the agent is aware of the problem, they might arrange and make a plan for the next month or two, or possibly even longer, where rent is overlooked.
In these circumstances, new terms will be drawn up where the tenant pays back the arrears as soon as they are in control of their finances again. This is not a long-term solution and can definitely not compound the problem, but it should be stressed again that if the tenant has been loyal and consistent in payment, the landlord will be more than willing to assist in most cases.
Restructure lease agreement
Alternatively, it might also be a good idea to renegotiate the lease agreement and draw up a new one where the rent is significantly lower.
This decrease in rent can then paid back at a higher rate six months or a year later. The tenant may also consider asking the landlord if they can sublet the unit or simply find another tenant to take over the rent. This can be a huge advantage for the landlord because he or she will save on extra agency commission.
It also enables the tenant to retain control of potential tenant visiting times, thereby enhancing and maintaining privacy.
There are, however, cases where the situation is not so easy to solve. Many landlords and tenants have strained relationships and it may lead to tenants being obstinate regarding their financial predicaments.
Tenants often don’t realize where their rent payment actually goes. Big profit every month for the landlord? Not quite!
Landlords use the rent to pay off their existing bonds and without it, it becomes difficult for their financial well-being too. The landlord might not have any other means of meeting his or her monthly debt.
Open line of communication
In a sense, both are equally dependent on the other, which is why communication is vital.
If the tenant is open and upfront about the troubles that they are experiencing, it allows the landlord (and potentially the agent) to be proactive regarding the situation.
If they have good standing with the bank, they can make another arrangement regarding the monthly bond repayments. If the situation has not gotten out of hand, the banks might have a sympathetic ear and completely move away from the option of repossessing the house.
The basic lesson that tenants need to learn is to have an open and honest relationship with their landlords because, in the end, they will be benefitting themselves and securing their own finances.