When renting out a property, the landlord should have signed a mandate with his agent if he has employed one, which sets out the terms of the service contract between them but there are many cases where some “forget” or confuse what type of mandate they have, says Gail Cawood, rentals manager for Knight Frank Residential SA.
The contract is usually for a fixed term, and there would typically be three types of mandates: a managed lease for an unfurnished house with full administration of the property, a managed lease for a furnished house, also with full administration and a non-managed lease, which has no administration service offered.
The commission for the non-managed lease is a once-off fee, which is usually a percentage of the year’s lease amount, i.e. if the rental is R5 000 per month, the year’s rent would be R60 000, and if the agent charges 7,5%, the commission would be R4 500.
The services included in the non-managed lease are the listing of the property to rent, complete with a photographic record of the property, the advertising to find a suitable tenant and the showing of the property to prospective tenants. It will cover the vetting of all the tenants as well as credit checks and reference checks and that they are FICA compliant. The agent will also negotiate the rental and any conditions that are pertinent to the lease.
In this case, there would be no other fee to pay and no further contact between the agent and the landlord after the tenant was found and the lease signed between the tenant and the landlord, said Cawood. With a non-managed lease, the deposit is usually held by the landlord but the agency can also hold the deposit in an interest bearing account, which will be paid back to the tenant with interest once the lease expires and he has vacated the property (if there are no damages).
With managed leases, for both furnished and unfurnished homes, the agent would be involved with the administration of the property, and the tenant management. The fees here are higher as there is more work involved, and this is deducted monthly off the rental before paying it over to the landlord.
Managed leases are usually recommended because they are more comprehensive and take the “headache” out if renting and managing a property or tenant, said Cawood.
In addition to the services mentioned above for non-managed leases, the managed mandate includes proper bookkeeping in respect of all monies received from the tenant each month. The agent will collect the rent from the tenant, and deduct any fees and disbursements according to the landlord’s instructions and pay over the balance to the landlord on a monthly basis. He will be responsible for inspecting the property every few months and attending to any queries or day to day management of the property as well as ensuring that all maintenance and repairs needed are taken care of timeously.
There are many things that can go wrong in a year, said Cawood, and in some cases the landlord might agree that all repairs to a certain amount be carried out at the agent’s discretion, and the agent will have to make sure that the work is done correctly and by reputable contractors.
“It is always recommended,” said Cawood, “that landlords ask their agents for a copy of the mandate and to read them through carefully before choosing which sort of mandate they want to go for. While it may seem unnecessary to pay higher fees, the time spent on some of the administration on a property and the managing of a tenant could outweigh the small extra percentage paid over.”