A Landlord’s guide to Vetting Tenants

/ / News, 2018, Property Law


The (mis)information found on the internet nowadays can make any non-paying tenant an “expert” in property law, with the unfortunate result that some invoke “squatter rights” within minutes of being threatened with legal action for the non- payment of rental. This has resulted in a situation where many tenants stay in occupation of the property, even though they have no lawful right to be there, for months after their lease has been cancelled, on the incorrect understanding that the court will not evict them. The landlord then has to obtain a court order to evict the tenant, and pay the sheriff to carry out the eviction (at huge expense and loss to the landlord, over many months).

This article looks at steps that can be taken to avoid reaching the point where an eviction is necessary. In some cases, just taking these simple precautions can save a landlord a huge amount of time, effort and worry in the long-run.

Credit Bureaus and TPN

Credit bureaus (including those specifically for tenants, such as TPN) are incredibly sophisticated nowadays. There are several different kinds of

‘check’s available, such as a comprehensive enquiry (which will show pretty much everything), a credit- check with the credit bureaus only, an ID verification check, a bank code check, a business check, a director check, a criminal record check, and even an individual trace. Whilst the cost of membership to these credit bureaus may not be cost effective for every landlord, the cost of obtaining one search (at around R90 per comprehensive search, if done on a non-subscription basis with TPN) is well worth the landlord’s while. A credit check (and in particular, a check with TPN that the tenant does not have any other reported defaults with prior landlords) is most certainly the first line of defence for any landlord.

Prior landlord references

Always ask for and check the validity of the tenant’s prior landlord references. Discovering that they are made up before the tenant moves in, will save the landlord the time, hassle and cost of allowing a dishonest tenant into the property.

Salary payslips, and bank accounts

Always ask for copies of payslips showing the tenant’s income, and check that the tenant’s income is sufficient to afford not only the rent, but the tenant’s other usual monthly expenses. Although one cannot say for sure whether any tenant earns enough to be able to afford the rent (because the tenant’s other expenses are not known to the landlord), the usual ‘rule’ is that the tenant must earn at least three times the rent. Also ask for copies of bank statements to check that the tenant is receiving the rental in the bank, and that the tenant has an actual bank account that the landlord can attach the funds in, if necessary, if the tenant defaults and the landlord needs to execute against the tenant for judgment taken against him/her/it.

Juristic persons

Be careful when renting to companies, trusts, or CC’s. It is common for a tenant to apply to rent and sign a lease in the name of a juristic person, which is just a ‘shell’, and earns a regular income and will have no liability for amounts owed if the tenant skips out or defaults on payment (this might happen if the tenant simply deregisters or liquidates or fails to pay for annual returns to SARS for the entity). Always try to establish whether the person (individual or business entity) that you are renting to (i.e. signing the lease with) earns a regular income sufficient to afford the rent – for example, don’t rent to a company owned by a tenant, if the tenant himself earns a salary in his own name. You may find yourself not being able to recover anything from the empty company, because it is the tenant who earns the income and not the company itself. You might also want to consider suretyship agreements and other forms of security when the person renting is a director or member of a company or CC, but the lease is signed in the name of the entity and not the individual him or herself.

Nothing is fool proof

However, even the vetting of a tenant through the mechanisms mentioned above is not an absolute guarantee that a credit worthy or trust-worthy tenant has been obtained. The following issues complicate the vetting process, as there are certain ‘loopholes’ in the system that can be exploited by tenants in the know if the landlord is not savvy enough to detect the deception: –

1. Although money judgments may be listed against a person’s name, evictions (which are not money judgments, but orders that the tenant vacate the property) are not. Even the best check will not reveal to a landlord whether the tenant has previously been evicted.

2. Most landlords chose not to legally pursue for the loss that they have suffered as a result of the default/failure to vacate for fear of “throwing good money after bad money”. Most of the time, landlords merely launch eviction proceedings in order to keep legal costs down and try to get the tenant out as soon as possible. This results in a situation where a very telling sign of a tenant’s default (i.e. a judgment granted against that tenant by a prior landlord) will not appear on any check that you do.

3. Furthermore, in terms of the National Credit Act 34 of 2005, a tenant could lodge a dispute (on basically any terms) in respect of any negative credit report which would mean that the negative report may have to be removed from the tenant’s profile while the credit bureau investigates the dispute. Essentially, an evicted tenant or one with a credit default may walk away with a relatively untarnished credit score if the credit bureau takes a very long time or never investigates and resolves the problem. In addition, a landlord may be unlucky and do a search whilst the dispute is pending and the negative report is not reflecting against the tenant’s name.

  1. Similarly to above, a tenant may have signed a prior lease in the name of another person or entity (such as his or her spouse, or company), and in this way the prior bad behaviour of the tenant is hidden from the landlord if the landlord is searching based on the tenant’s name.
  2. Further to the above, it could be that the removal of a bad credit record forms part of the negotiations between landlord and tenant when it comes to the tenant vacating the property. Essentially, the landlord is so desperate to get rid of the tenant and in order to allow them a better opportunity to obtain alternative accommodation, the landlord may consent to the removal of the bad credit rating.
  3. References obtained from the previous landlord can be misleading to say the least. If the landlord is desperate to get rid of this tenant, he or she may paint the tenant as an acceptable or even good tenant.
  4. Certaindocumentscanbeforgedandalteredvery easily.
  5. Entire identities can be stolen.

In–depth vetting

It is always advisable to go to every reasonable length when vetting a tenant (even though the investigations

may not always reveal a deception, especially when encountering scammers or “professional squatters” who are experts at fooling landlords and agents). Specifically, the following may assist:

1. Apart from calling the tenant’s prior landlord, also try to call the landlord prior to that. Essentially, that landlord has nothing to lose (because presumably the tenant is no longer in his or her property) and it is likely that he or she would be more forthcoming in regard to the tenant’s history;

2. Meet the tenant personally and establish a relationship with them;

3. Never allow a tenant occupation of the property without paying a deposit, signing the lease, and taking copies of all of his documentation like prior references, bank statements, payslips, etc. so that if need be you have a starting point for tracking him down later;

4. As far as you can, make sure that the documents obtained (like bank statements or copies of ID’s and payslips) are originals or certified copies. If you can, avoid accepting emailed documentation, as these can be easy manipulated;

5. Always make sure that when a juristic entity like a company is listed as the lessee, the tenant or director of the company signs surety as co-principal debtor and that the company, is still a registered entity and that it receives a regular income that can be used to pay the rent;

6. If you are in a position that you need to evict a tenant, immediately approach an attorney for assistance. The sooner you start the necessary (and lengthy) process of evicting a defaulting tenant, the sooner you cut your losses and can re-tenant the property. In regard to the claim for arrear rental and damages, a landlord is always entitled to utilize other avenues that don’t require an attorney’s assistance, should he or wish to keep the legal costs down, for instance the Small Claims Court or the Rental Housing Tribunal.

Share Article: