Stringent credit restrictions can make life difficult for landlords as well as tenants

The financial institutions’ clamp down on defaulting mortgage bond repayments has made it absolutely essential for those landlords who are themselves bonded to receive payment from their tenants on time every month, says Bill Rawson, Chief Executive of the Rawson Property Group.

“In the old days,” said Rawson, “the banks were often prepared to be understanding about landlords who had difficulty in getting their tenants to pay their rents and they were open to extending bonds and granting access facilities on existing bonds without stringent credit limitations.

“Those days regrettably are now over. Since the National Credit Act the banks have been forced to become very unsympathetic about any breaches in the mortgage repayment schedule.”

Should a landlord fall behind on his bond repayments, said Rawson, he may well find that he is credit black listed with those organisations that keep track of these matters. This will make it difficult for him later to get a new bond or indeed any other form of credit.

For tenants, said Rawson, the tighter restrictions have also made life far more difficult. They are often expected to pay upfront a deposit equal to two or three months’ rental. Previously the deposit was often only one month’s rental and many landlords would accept deferred payment of it.

Later, when the tenant decides to move on, the deposit is often not paid back until he has completely vacated the premises, the reason for this being, landlords claim, that they cannot properly assess damages until the premises are empty.

This in turn means that when asked to pay a new deposit for their follow-up premises they frequently do not have the money. The net result, said Rawson, is that tenants are now far less mobile and far more likely to extend their leases than they were before.

One of the main lessons to be learned by estate agents from the current conditions, said Rawson, is that the initial vetting and selection process of tenants now has to be even more thorough and it will pay landlords to use those agents with experience in these matters.

“It is only too easy for an inexperienced landlord to be bluffed by an impecunious but glib possible tenant. We have recently seen several instances where the references, on being thoroughly checked, turned out to be bogus and the credit track records in some cases absolutely disastrous - but it needs a good agent to unearth these facts.”

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