Advice and Opinion

New year, new lease? Get a new credit report

If you’re a residential landlord currently renewing any leases, you really should insist on a fresh credit check on your existing tenants before you sign anything – and perhaps even consider asking them to top up their deposit.

That’s the word from Chas Everitt Property Rentals CEO Greg Harris, who notes that even if your tenants have been good payers up until now, everyone’s budget has been put under strain in recent times by the rising cost of living, and many consumers have been taking on additional debt in order to cope.

“They may well have more credit card debt or more store debt now than they did when they first moved in – especially after the festive spending season. They may even have taken out a new personal loan and, with an interest rate rise imminent now because of the low value of the rand, that could spell trouble.”

He explains that the rate rise will mean that the monthly repayments on all these debts go up, and that since medical aid subs, insurance premiums and school fees all usually go up in January too, many people, including tenants, could start finding it very hard to make ends meet in the coming months.

“As it is, the latest figures from the National Credit Regulator shows than only 57,7% of credit-active consumers are in good standing, while more than half (53%) of all the new applications for credit now being made are being turned down. This indicates that many prospective borrowers are already considered by credit providers to be over-indebted”.

“What is more, wage and salary increases are expected to be very modest in 2016. And in the current climate we are not expecting any personal tax breaks to make life easier for consumers. In short, landlords’ rental incomes are likely to be at greater risk as this year advances, so a careful review of their tenants’ financial position is a good idea.”

In fact, Harris says, even if their credit reports are good, tenants’ employment or employment prospects may well have changed in the past year or two, so landlords should probably ask their managing agents to also request three to six months’ bank statements and an employer’s reference, just as they would do with a new tenant.

“And finally, it would be a good idea for your agent to conduct a new inspection of the property to see if it has been kept in reasonable condition during the course of the previous lease. This should of course be done with the tenant present, and a condition report or inventory should then be signed by both parties and attached to the new lease to prevent any future disputes over damages and deposits.”