With the recent downturn in property sales, many estate agents have turned to rentals as a source of additional income, or to bridge a drop in income.
The result is that there are now hundreds of rental agencies operating in South Africa, from large, well-established property groups to brand new entrants to the market with little or no experience. Only some of these are able to provide a reputable, reliable service that benefits tenants and landlords.
Pam Golding Properties’ rentals director for the Western Cape, Dexter Leite, says his division has recently come across several instances where landlords and tenants have had negative experiences with agencies, often with dire financial consequences for which there is seemingly little recourse. Major problems include agencies not refunding deposits to tenants with no reasons given, or not handing over rentals that have been collected from tenants.
Leite says residential letting, like any other business, carries risk. Sometimes even the most reliable tenant can find themselves retrenched or experience sudden changes in their personal circumstances – and likewise the landlord’s circumstances can suddenly change.
“Because of this risk, we urge landlords and tenants to be extremely cautious in their approach to choosing a rental agency – and agent – with the necessary credentials, skills and experience to help them navigate this environment.”
Word of mouth should be your first guide to identifying a good agent, says Leite. Do some research, and you will quickly find out if an agency is not all it seems to be. It’s essential to ensure the proper legal requirements and knowledge are in place – for example, you must ask any potential agent to demonstrate that they hold a valid fidelity fund certificate, which has to be renewed annually and assures that the agent and agency are registered with the Estate Agency Affairs Board. Having a valid fidelity fund certificate also provides landlords and tenants with some protection in the event of agents absconding with their money.
You should also probe the agent and agency’s length of operation and experience in the area, he says.
“Don’t be afraid to ask detailed questions – how many properties have they let in the past two months, what rentals were achieved, how long have the particular agents worked in the area and in the industry, and can they provide any references? What administrative back-up do they provide if they offer managed leases? How do they go about vetting potential tenants and checking their creditworthiness? If the property is managed, how do they advise landlords about non-paying tenants? And are they abreast of the latest legislation? The Rental Housing Act is complex, and a thorough knowledge and understanding of its provisions is essential for a professional rental company.”
The standard of the agency’s documentation is also a good indication – it should be able to provide comprehensive, up-to-date, legally-compliant lease agreements and detailed mandates to landlords of their duties for managed and unmanaged leases.
The service rental agencies offer will vary according to the size and scope of the agency, and its business model. Smaller, low-key businesses are likely to simply procure tenants in return for fees. But well-established, adequately-resourced agencies may be able to offer managed leases, whereby they procure the tenant and administer the property. It is up to landlords whether their properties are managed or not. In either case, the rental agent should be responsible for assessing the premises and advising landlords of any possible maintenance or repair issues, before proceeding in terms of agreed mandates. They should also provide estimated rentals for properties, based on current market conditions in the area.
Screening prospective tenants is a key responsibility, to ensure they are financially qualified to meet the obligations of the lease, at the time of vetting. Agencies should ensure that tenants pay the deposits required in terms of the leases, as well as the first month’s rent, before occupation. If leases are managed, agents must also monitor payment of the relevant utilities consumed during the lease period. They should also satisfactorily explain any query regarding the terms and conditions of lease agreements when they are being negotiated.
PGP’s MD for the Western Cape metro region, Laurie Wener, says PGP views the letting business as an entirely separate division from its sales division.
“Letting requires specialised agents with specialised skills. Our rental agents have their own offices and administrative support teams, and their own dedicated regional directors. In the Western Cape alone we operate eight rental offices, with 15 dedicated rental agents and 18 back-office staff. They are further supported by a centralised national team of 14 people who manage all data about leases negotiated, deposits, rentals and other payments. In-office back-up services include facilities for ITC credit checks, water-tight lease agreements and a well-developed presence on the website. They can also offer clients a number of additional services such as advice on insurance and tax issues, and access to a network of experienced suppliers who can assist with maintenance and repair issues.”