Start building a healthy credit record
It’s never too early to start building a healthy credit record.
That’s the advice of Young Carr, CEO of the Aida property group, who says: “Most homebuyers need home loans, but what many don’t appreciate is that the process of obtaining this credit actually needs to begin years in advance of the decision to buy property.”
The first thing banks will do on receiving a home loan application, he says, is to check the prospective borrower’s credit history, which means that good management of monthly bills, including any clothing or furniture accounts and credit card payments, is critical even for young people who have no immediate plans to buy a home.
It is also important for future buyers to open a savings or cheque account in their own name, to keep it balanced and not to overrun credit limits. “And a history of full payment on time for a major purchase, say a car, will be a great recommendation for any mortgage applicant,” he says.
Vet tenant to avoid lengthy evictions
Legal firms which run debt collection divisions have seen a marked rise in the number of recalcitrant, non-paying tenants whom they are instructed to ‘deal with’, according to Ian Teague of Cape-based Gunstons Attorneys.
The problems faced by landlords and/or their managing agents, says Teague, are exacerbated by the sensitivity of the housing issue in South Africa – of which the Courts, he says, are well aware.
He says the courts have to bear in mind that the right to access adequate housing is spelt out by the Constitution, and elaborated upon by a long line of case law. “This obliges the Courts to consider legal proceedings carefully where the result may land a defaulting tenant on the street.”
Having said that, says Teague, it has also to be recognised that non-payment of rent is a breach of the lease agreement and those guilty of it will in the long run be called on to pay not only the money owing but also the interest on unpaid rents and the legal costs involved, provided this has been covered in the lease agreement.
Don’t overdo rental increases
Landlords need to be wary of increasing the rent on their property by too big a margin because they may risk losing a good ‘paying’ tenant.
Talking recently at the inauguration of Rawson Rentals, a new Rawson Properties franchise division set up to grow and support rental franchises countrywide, Tony Clarke, MD of the Rawson Group, warned landlords that the current “dire” economic situation has created a scenario in which landlords who insist on the usual 10% annual increases could find themselves losing tenants fast.
“If ever the advice ‘do not be too greedy’ was especially applicable, it is right now,” said Clarke.
Landlords who do insist on 10% increases, said Clarke, will in all probability find themselves losing tenants because attractive lower rentals will be available elsewhere.
Buying vs. building a new home
Those looking for a new home often ask: what is the better option, to build a home from scratch or to buy an existing one?
Adrian Goslett, CEO of RE/MAX of Southern Africa, says there is no right or wrong answer to this question. However, each option should be cautiously worked out from a financial point of view and carefully considered according to individual requirements.
“In the past it was considered more cost effective to build a new home, but more recently the recession and reduction of property prices coupled with increased building costs has meant that buying an existing home is now often the more cost effective option,” says Goslett.
This is backed by a report released by Statistics SA which shows that building costs have increased substantially over the past year. This if reflected in the fact that the value of building plans passed by the larger municipalities increased by 4,9% during the period January to June 2011, compared to the same period in 2010. This calculation is concluded at the current building prices. The largest increase in building cost reported was for residential buildings, which increased by R1,12 million or 8,9% for the same period.
What damages can my landlord claim?
A Property24 reader asks:
On termination of a lease agreement to what extent can the landlord claim for damages? Can items include painting of walls and general cleaning? And if items were defective before occupation and brought to the landlord's attention, can the landlord claim for those items if he did not fix them?
Alan Levy, an attorney at Alan Levy Attorneys who specialises in evictions, rent recoupment and landlord / tenant law replies:
The landlord, on termination of the lease agreement, can claim from the tenant damages for any defects to the premises i.e. if the walls were tarnished by the tenant or if the premises were left in an unclean way, these costs can be claimed by the landlord.
If items such as these were defective before occupation and brought to the landlord's attention, then the landlord cannot claim for these items, once the lease is terminated.
In general, any conduct by the tenant which causes damage to the premises may be reclaimed by the landlord. If the premises were damaged before occupation and this was properly recorded by the tenant then these damages cannot be claimed by the landlord from the tenant.
Auctions attract buyers and investors
South African would-be home buyers are actively looking and placing their bids at auction houses in search of good value for money residential properties countrywide.
Auctioneers are reporting an influx and purchasing appetite from buyers and investors from all walks of life.
Buyers and investors turned out in great numbers at the recent auctioning of 49 sectional title units in Ruimsig area of Roodeport in Gauteng.
Park Village Auctions’ Michelle Liebenberg says the units are mostly two bedrooms and one bathroom in various estates located close to Monash University.
Currently, most of the units are rented and she expects demand to come partly from the existing tenants. She says the price bids were better than expected and compared with normal retail prices, they were genuine bargains.
Attaching a tenant’s possessions
Obtaining a hypothec may be a way of achieving payment from a defaulting tenant, but is it worth the cost and the hassle?
The explanation of legal terms used in property can sometimes be so complicated that only the brightest minds eventually pick up the clear, usually simple, meaning for which they were aiming – and this, says Lanice Steward, MD of Anne Porter Knight Frank, is often the case when the term ‘hypothec’ crops up.
“A hypothec gives a creditor a non-possessory security interest in a debtor’s real property and a preferential right to claims paid out of that property if and when the debtor defaults.
“The hypothec, unlike a pledge, gives neither possession nor ownership – but does entitle the creditor to a preferential claim on the debtor’s goods,” she says.
Steward says this has particular relevance when a tenant falls behind on his rental payments over a long period. In these cases, the landlord may apply through the court for a hypothec on the tenant’s goods. "However, such an order does not allow the creditor to act on his own account: the attachment and removal of the goods for subsequent sale have to be done by the Sheriff of the Court."