Boom time for Winelands rental market is also a steep learning curve

The Winelands rental market has grown in tandem with the escalating sales market and, while this boom is good news for investors who are enjoying healthy returns, the new buoyancy is also highlighting several challenges in the rental arena, especially for landlords who are not well-versed in the new regulations.

Rental properties like this furnished three-bedroom family home in Boschenmeer Golf and Country Estate are popular in the Winelands. The monthly rental is R25 000.

This is according to Genevieve Smith, regional rentals manager for Lew Geffen Sotheby’s International Realty in the Winelands, who says that two key factors have affected the local rental market, with a growing number of uninformed landlords finding themselves in legal and financial hot water.

“Although the Winelands still offers residents a tranquil country lifestyle, the towns have grown in recent years and they are no longer villages where residents all know each other and a casual verbal agreement between landlord and tenant is often all that was required.

“Additionally, the rental market has become more complex and is subject to more exacting regulations since the introduction of the Rental Housing Amendment Bill and the National Credit Amendment Act and its regulations, with consumers also being much more aware of their rights these days.”

Smith says that in spite of the new regulations, owning rental property can still be very rewarding for landlords who have reliable tenants; paying on time and taking care of the property.

“Investors can do very well in the Winelands as the dearth of available rental properties has driven up prices with returns often exceeding the national average and occasionally even reaching double digits.”

However, as the new laws play an enormous role in the rental arena, often favouring tenants, landlords who are unfamiliar with them can easily become embroiled in lengthy and costly battles, especially as eviction is no longer a simple matter of giving tenants a month’s notice.

“It can become very difficult, stressful and time-consuming to manage a property with a problem tenant and the days are long gone when eviction was the simple solution.

“The first and most crucial step in averting possible problems is the selection of a suitable tenant, and this is where the services of an experienced property manager with specialist knowledge is invaluable as they not only have a thorough understanding of all the applicable laws and regulations, they are also able to effectively screen all applicants.”

This process includes sourcing information that landlords usually don’t have access to, including a detailed credit check. The property manager will present the landlord with a comprehensive tenant assessment report detailing the tenant’s credit history and future ability to pay, results of reference checks and all relevant documentation in line with FICA requirements.

Smith says that in addition to this crucial step, property managers will also effectively manage property inspections, lease negotiations, lease renewals and terminations, rental collection, deposit management and assist the landlords’ attorney with the eviction process if necessary, which can often help the property owner avoid costly law suits.

Chris Cilliers, chief executive and principal for Lew Geffen Sotheby’s International Realty in the Winelands, says: “In addition to the main governing regulations, the rental laws also contain many other stipulations that can trip up landlords even after the tenant has departed.

“Many property owners are unaware that deposits must be placed in an interest-bearing account and, when the lease expires, if no amounts are due and owing to the landlord, the deposit must be refunded together with the accrued interest within seven days of the lease expiring.

“Furthermore, failure by the landlord to inspect the property in the presence of the tenant at the end of the lease is deemed to be an acknowledgement by the landlord that the dwelling is in a good and proper state of repair, and the landlord will have no further claim against the tenant who must then be refunded the full deposit plus interest.”

If any repairs are needed that are for the tenant’s account, they must be immediately carried out and the reduced deposit refunded within 14 days of completion, along with copies of receipts for the tenants as proof of costs incurred.

Cilliers says that in the long litany of new regulations that could easily be overlooked, two points potentially have considerable bearing on lessees and lessors.

“According to the Consumer Protection Act, lease agreements may only exist for 24 month, with a longer period permissible only if there is a demonstrable financial benefit to the tenant and the onus lies on the landlord to prove a demonstrable financial benefit.

“And, if the lease is signed by two Juristic Persons, (legal entities such as companies and corporations) then the agreement will fall outside the scope of the Consumer Protection Act.”

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty says: “The Payprop Rental index for the first quarter of 2016 has revealed that the Western Cape rental market remains strong in the face of the general market downturn, retuning to double digit growth last seen at the beginning of 2015.

“And with the continued influx of upcountry families moving to the Western Cape, many of whom are drawn to the country lifestyle of the Winelands, the current trend looks set to continue.

“A growing number of Capetonians are also moving to the Winelands, which is becoming especially popular with people working in Cape Town’s northern suburbs as the growing business node in that area means that the daily commute is a lot easier than travelling all the way into Cape Town in peak hour traffic.”

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