Rental property and Covid-19 Lockdown

The current State of Disaster and Lockdown has had a dramatic effect on our lives and residential rentals have not been spared. Here are some Questions and Answers that may help clarify any uncertainties that you may have.

Covid19 Q&A - Landlords and Tenants

Q: Will Etchells & Young (E&Y) Still Be Collecting Rent And Managing My Property During The Lockdown?

A: Yes, even though E&Y are observing the Lockdown, our Team is working remotely from home with virtual access to our server and property management systems. Our switchboard is also operational and thanks to cloud-based technology, phone calls can be transferred to staff members as if they were in the office. We have had a very busy week processing tenant payments, paying landlord accounts and disbursing rentals. To date we have processed almost 89% of our monthly rent-roll, we think that under these Lockdown circumstances that is excellent! Thank you Etchells & Young tenants, you guys are great!

A: Yes, tenants are obliged to continue to pay rent in terms of their lease during the Lockdown. Unfortunately the Lockdown or an associated lack of income for the tenant does not excuse them from their obligations in terms of the lease. Also, if a tenant has remained in occupation of the property after the lease has ended, but could not move out due to the Lockdown, they must continue to pay rent for that property. Simply put, if you are enjoying beneficial occupation in any property, you do have to pay rent. Should your financial position be such that you are not currently earning a salary and are temporarily unable to pay rent, then URGENTLY contact your Landlord or Rental Agent to discuss your options and make an alternative arrangement. DO NOT simply stop paying your rent, as mentioned if you are in the property, you are obliged to pay the rent, despite the circumstances

A: As mentioned above, the tenant is obliged to pay rent, this is after all one of the basic rights of a Landlord in terms of the Rental Housing Act. However, the situation we find ourselves in is to say the least, unprecedented. Simple, be fair and reasonable. Seek to negotiate an amicable outcome. If you are for example able to negotiate a payment holiday for your bond repayments with your bank, pass this benefit to you tenant. Do however do your homework and verify the actual situation of the tenant. Regrettably society contains individuals who will take advantage of any situation, so get proof from the tenant and confirm that they are for example on unpaid leave during the Lockdown. In other words, assess the risks involved, but again be fair, reasonable and understanding of the overall Lockdown and Coronavirus situation. Should you consider a rental payment holiday or reduction in rent for your tenant, be sure to sign proper agreements in this regard, and always try to get the tenant to make a portion of the rental payment and at least to also pay to for the utilities that they consume. Etchells & Young will negotiate, provide the relevant agreements and manage this process for our Rental Management clients, so please contact your Portfolio Manager should you want us to assist.

A: Utilising the tenant deposit is not as straight forward as it may seem. The Rental Housing Act is clear and only allows for the deposit to be released at the end of the lease, after the exit inspection has been done. These are however unusual times and special arrangements, new agreements and out of the box thinking may be required. TPN have come up with an excellent solution whereby the deposit can effectively be paid back to the Tenant, who then pays it to the Landlord. This is not unlawful and in reality this payment is more streamlined and the parties enter into a specific new agreement to manage this process and provides for a re-instatement of the deposit at a later stage. Do bear in mind that there is a greater risk involved when there is no longer a deposit available and therefore the Landlord should only consider this for an excellent tenant who really has a short-term financial problem. Etchells & Young will provide the relevant agreements and manage this process for our Rental Management clients, so please contact your Portfolio Manager should you want us to assist.

A: If your tenant was unable to move out as a result of the lockdown, they have no choice but to remain in the property and pay rent. The Lockdown has the effect that the lease is automatically extended until it is lifted, so the same would apply if the Lockdown is extended even further after the initial 21 days announced by President Cyril Ramaposa. The wise and prudent thing to do would be to agree to extend the lease on a month-to-month basis so that the lease now terminates at the end of the month that the Lockdown is lifted. It is usually always easier for a tenant to move at the end of the month.

A: No, you are not allowed to charge your new tenant any rent if they were unable to take occupation due to the Lockdown, which meets the legal requirements of a Force Majeure or vis major – commonly known as an Act of God. This means that it is completely beyond the control of the tenant and it would be unlawful to charge them rent when they did not have beneficial occupation of your property. Also, bear in mind that the tenant will need to pay the rent in the property where they had to remain. Also if the Lockdown is extended beyond the original end date of 16 April 2020, then the same principle applies. Your new tenant’s lease will start on the first day after the Lockdown as the Lockdown will have the effect of extending the start date automatically. A wise and realistic option may however be to agree that the new start date of the lease will be the first day of the month following the month in which the Lockdown ended. It is just much easier to manage moves at the beginning of a calendar month.

A: All business days for issues related to the National Credit Act are extended until after the Lockdown ends at midnight the 16th of April, but bear in mind it may be extended. This means that your notice is paused and you start counting business days again on Friday 17th April, if the Lockdown is not extended. The courts are also closed during the Lockdown period.

A: Yes you can, but bear in mind the Post Office is closed, so physical letters and notices will not be delivered. Thankfully Etchells & Young’s lease agreement makes provision for email delivery of notices in terms of the lease. Also be aware that unlike the National Credit Act, the Consumer Protection Act’s (CPA) business days have not been suspended, so business days are counted as usual for CPA notices and cancelation purposes.

A: Yes, the CPA allows for you to cancel your lease at any time by giving 20 business days’ notice. The Lockdown does not affect this. Just bear in mind that the Landlord may charge a reasonable cancellation penalty ito the CPA. Also take the current situation in to account, be fair and reasonable and do all you can to mitigate the Landlord’s losses (loss of rent, cost of finding a new tenant, etc) by providing as long a notice period as possible. If you have mitigated losses, the Landlord should take this into account when determining the cancellation penalty.

A: Yes you do, this is part and parcel of owing property. Either you or your tenant are enjoying beneficial occupation and these items would fall outside the scope of the current Force Majeure. You may be able to negotiate a payment holiday of your bond repayment with your bank, but this will be a negotiation you need to have with them. The Body Corporate (wrt levies) still need to provide services such as security, water, electricity and emergency maintenance and repairs, so they will need the levy income to keep doing this.

A: Only maintenance and repairs that constitutes an emergency will be able to be done.

A: Yes you do, this is part and parcel of owing property. Either you or your tenant are enjoying beneficial occupation and these items would fall outside the scope of the current Force Majeure. You may be able to negotiate a payment holiday of your bond repayment with your bank, but this will be a negotiation you need to have with them. The Body Corporate (wrt levies) still need to provide services such as security, water, electricity and emergency maintenance and repairs, so they will need the levy income to keep doing this.

A: You are entitled to use the common property in a sectional title complex, but it now needs to be in accordance with the State of Disaster Regulations or simply put, you must adhere to the conditions as required by the Lockdown announced by the President. We are aware that some Body Corporates and /or Home Owners Associations are putting into place special rules that prohibit certain uses of common property. This becomes very tricky. Bottom line, be safe, be sensible, adhere to social distancing.