Landlords and property managers can always get caught out by a delinquent tenant and often blacklisting is seen as the only way forward. However, blacklisting leaves a negative mark against a person’s credit profile and needs to be seriously considered before executed.
Landlords and property managers can always get caught out by a delinquent tenant and often blacklisting is seen as the only way forward, but there are a number of things to consider before going this route.
Before entering into a lease agreement, landlords and property managers can run credit checks on the proposed tenant as a protective measure. Aside from blacklisting information, credit bureaus also store positive information regarding the payment behaviour of consumers/tenants which makes it easier for the tenant to enter into lease agreements.
The latest rental stats from TPN Credit Bureau reveal that “Good Standing” regular rental payments are sitting at 81%, which is a growth of 10% from previous years. However, 9% of tenants are only partially paying their rent each month and a further 10% are not paying at all.
There are essentially four basic steps for dealing with a delinquent tenant:
1. Demanding payment via letter of demand
2. Cancelling the lease due to breach of contract
3. Demanding the tenant vacates the property
4. Obtaining a court order to have the tenant legally evicted from the property
In most cases fast action by the landlord or property manager will lead the defaulting tenant to vacate the property once the lease has been cancelled. However, financial shortfalls mean the landlord is now faced with a decision on whether to proceed with one of the following types of blacklisting:
- A Court Order Judgement
- Adverse default against the tenant’s credit profile
There is a significant difference between the two, and landlords and property managers have to be clear in their understanding. A Court Order Judgement is an expensive and lengthy process because it involves a court process that is determined by the value of the judgement. Judgements over R150,000 must be heard before a high court and judgements of lesser amount fall to the local magistrates courts. A judgement will be displayed by the credit bureaus on a person’s credit profile for a period of 5 years, but the plaintiff has a 30 year window of opportunity to collect on a judgement.
A landlord should seriously consider the amount the tenant owes versus the cost of obtaining judgement. It is not good business sense to throw good money after bad money if the cost of obtaining the judgement is greater than the amount due by the tenant.
A more common alternative is the adverse default. It’s not expensive and landlords or property managers can choose their course of action, giving them more control over the situation. An adverse default can be loaded for free by TPN Credit Bureau once the landlord or property manager has given the tenant 20 business days notice of their intention to list the default.
The landlord or property manager has a duty to ensure the adverse default information is accurate, complete and not duplicated. Once listed the adverse default information will display on the person’s credit profile for a period of 1 to 2 years depending on the default itself. Once a tenant has settled the arrears with the landlord, the landlord or property manager is obliged to contact TPN Credit Bureau and either delete the adverse default or update the defaulted tenant’s status to “Paid Up.”
Tenants need to also be aware that they have the right to recourse and should they believe the information recorded on the TPN Credit Bureau is wrong, a dispute can be logged. TPN will investigate the claim and either delete the inaccurate information, or reinstate the adverse default if the information is indeed accurate. -
Michelle Dickens, Managing Director, TPN Credit Bureau