Zero-deposit lease a new protective measure for landlords - CNBC Africa

Zero-deposit lease a new protective measure for landlords

Southern Africa

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Houses for rent. PHOTO: Getty Images

“There are a number of very simple things that we do make sure that the landlord is protected. You do a simple credit check, a simple character check, [and] make sure that you deal in and out inspections. Simple things have changed in terms of regulation regarding the in and out inspections,” Rentshield director Martin Goodman told CNBC Africa.

“If you don’t do an inspection, irrespective of whether that tenant has left the state in disrepair or not, he or she is entitled to [their] deposit back. You need to do the simple things properly first up.”

Rentshield is a letting market product and service provider in South Africa.

While interest rate hikes create favourable conditions for commercial property owners, landlords have to find ways to ensure payment, as the rising cost of living is not a positive aspect for the tenant.

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Goodman added that once a landlord has a good tenant, another set of challenges could nonetheless occur.

Despite a clean character and credit check, other external circumstances such as petrol price increase or interest rate hikes can change a tenant’s payment behaviour.

Once the tenant is negatively impacted, they could start to make irregular payments and in some cases, default on them. There are however a variety of products on the market that can be used to provide leasing security.

“The traditional [options] are rental guarantees, deposit guarantees, but those have been on the market for quite some time now. The latest product that’s on the market is the zero deposit lease, which brings in a whole new system whereby the tenant doesn’t need to put a deposit down to secure a lease. That provides better security for the landlord than a traditional deposit would provide for,” said Goodman.

A deposit on a property is a means of securing a leasing opportunity, but depending on the circumstances, a landlord can decide set up a two to three-month deposit as a means of protection. This could be due to a previous tenant failing to keep the property in the condition it was given.

“At Rentshield, we’ve got statistics that tell us that zero-deposit tenants pay far better than deposit tenants. It flies in the face of traditional thinking that if a tenant has a two or three-month deposit in place, he’s financially committed to the property and they’ll look after the property better. We don’t believe that’s the case,” said Goodman. 

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