Landlords getting eviction notices ready for end of lockdown

More than a quarter of tenants are in arrears on their rent and while current regulations mean that evictions cannot take place, that will not be the case forever. In the meantime, landlords are getting their eviction orders ready to be executed as soon as the rules change, or lockdown ends.

According to Michelle Dickens, managing director of TPN Credit Bureau, 26.5% of tenants were in arrears during Q2, with 23.67% not paying their rent in April. During hard lockdown in May, it increased to 28.1% and in June to 27.91%.

“In July we saw a slight improvement when 26.61% were behind with their rent. The August preliminary statistics show that 27.10% of tenants are in arrears, but we expect the final figure to be closer to 26%. Now, in the first two weeks of September, we are sitting at 34.54% but with two weeks of collections still remaining, TPN expects a similar result to July/August at the current rate.”

She explains that the April figure helped to prop up the overall Q2 good standing of 73.50%.

“Although we are starting to see improvement in July and August from the lowest point in the month of May, the overall Q3 good standing will probably only improve by half of a percentage point.”

Although no tenants have been evicted so far, Dickens says the regulations allow the courts to grant eviction orders which are stayed to the end of the State of National Disaster.

“The current legislation supports landlords in taking legal action during the National State of Disaster and getting their eviction orders ready to execute once the National State of Disaster has been lifted.”

How the Covid-19 lockdown has affected tenants’ ability to pay rent. Graphic: Costa Makola

The PayProp Rental Index shows that 23.1% of tenants were in arrears in April, with the figure climbing to 26.1% in May and showing a small decrease to 25.6% in June. This figure decreased to 24% in July and further to 22.7% in August.

In May, 44% of PayProp clients had between 25 and 50% of their tenants in arrears, dipping to 42.1% of clients in June. In the lower categories, 29.6% of clients had between 15 and 25% of tenants in arrears, rising to 31.1% of clients in June.

Johette Smuts, general manager of PayProp Capital, said: “Ideally, the lower categories will become fuller over time and the higher ones will become emptier as tenants start to settle outstanding rent amounts. When considering the average arrears amount, we spot a worrying trend. In May, 10% of clients had an average arrears value of more than 150% relative to their average monthly rent and that increased to 15.4% of clients in June.

“Similarly, in May, 33.8% of clients had average arrears of between 100 and 150% of their average monthly rent. This increased to 39.1% of clients in June, more than double the share of clients in this band of arrears in March. It is clear that the lower categories are emptying out, while the upper buckets are filling up. This is the opposite of what we want to see.”

The majority of tenants renting homes from property management company Trafalgar are in arrears with their rent, generally related to affordability and largely related to Covid-19 lockdown restrictions.

According to Andrew Schaefer, managing director of Trafalgar, far more people are in arrears than a year ago.

“Rentals, especially of rooms and student accommodation, of below R3,500 per month are most severely impacted according to TPN Credit Bureau. More people who rent expensive units above R20,000 per month are also in arrears.”

Berry Everitt, CEO of the Chas Everitt International property group, says demand is lower and vacancies are higher at the lower end of the rental market below R7,500 a month.

“Low-interest rates are encouraging many good tenants to buy homes rather than continue to rent. However, the creditworthiness of many new applicants has been severely damaged by the Covid-19 pandemic.”

Rental administrators at RE/MAX All Stars, Despina de Necker, Alta Botes and Charlotte Oberholtzer at RE/MAX All Stars, say roughly 27% of their tenants are in arrears, mostly due to the lockdown. Many of them are not receiving a salary or reduced pay. They have tenant payment plans in place and believe they will be able to bring the percentage down over the next couple of months. They agree that there are more defaulters now than a year ago due to the lockdown.

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