Owners of rental properties should be wary of becoming too strict in their acceptance or otherwise of prospective tenants’ credit credentials and should make use of the full gamut of credit check mechanisms available to them.

Gerhard Kotzé. CEO of the ERA South Africa property group, makes the comments in the wake of delays to proposed legislation which would have amended the Prevention of Illegal Eviction and Unlawful Occupation (PIE) Act.

The amendments sought to “free private residential landlords and banks (in the case of repossessed properties) from the full rigours of the PIE Act” as the Estate Agency Affairs Board put it.

The original intention of the 1998 Act was to regulate and control land invasions in urban areas but its applicability was broadened by a Supreme Court of Appeal judgment which resulted in ordinary tenants and home loan defaulters who refused to vacate residential properties also enjoying the Act’s extensive protection.

The proposed amendments sought to change the definition of “unlawful occupier” once the consent to occupy a premises had been withdrawn by the owner. The amendments have now been put on hold for at least another year.

Kotzé says this has led to an understandable reaction from landlords wary of tenants able to resist eviction without expensive court action. “Not surprisingly, landlords are now additionally cautious in their acceptance of tenants. And while checking the credit track record of tenants is simply good business practice, it does also have the potential to make landlords overly selective in their tenants, possibly to their own detriment.

“Normal credit checks on tenants are of course advisable under any circumstances, but in the current climate of credit stringency, there could arguably be unnecessary blacklistings although I am sure the credit bureaux would dispute that.

“Part of the answer lies in broadening the scope of the credit checks beyond the more broadly focused credit bureaux, to include specialised tenant-checking organisations with information such as past history in rented accommodation, default information from previous leases and judgments as well as cross references with other credit data sources.

“At the end of the day gut feel about a particular potential tenant may not be misplaced either.”

Article from: www.era.co.za