Landlords still fret about late rent

Published Mar 20, 2014

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Roy Cokayne

Late rental payments continue to pose a challenge nationally to commercial property landlords.

TPN credit bureau said almost one in four tenants had paid rent after the due date in the fourth quarter of last year.

It said the most negatively affected regions were the Eastern Cape and KwaZulu-Natal, where more than one in three tenants were consistently late payers.

However, TPN said that on the positive side, it was also customary for commercial rent collections to recover in the first quarter of each year.

TPN said that in addition to the current pressure of generally tough economic conditions and volatile currency issues, a variety of more seasonal challenges probably also featured in the fourth quarter.

For instance, Statistics SA employment data showed a consistent annual decrease in unemployment in the fourth quarter of each year, indicating a rise in temporary work for the period and consequently additional wage expenses for many businesses. Bonus pay still resulted in extra cash-flow stress for most firms during this time and December holiday shutdowns exacerbated matters.

TPN’s Commercial Rental Monitor, which covers office, retail and industrial rentals across South Africa, showed that 81 percent of commercial tenants were in good standing for the fourth quarter.

Tenants in good standing comprise those who paid on time (57 percent), paid in the grace period (8 percent) and paid late (15 percent).

TPN said that after the planned credit amnesty, landlords and their property managers would still be able to rely on vital rental data for tenant leasing decisions when placing tenants. It said credit bureaus treated their commercial data or information on businesses and consumer profiles in the same manner.

TPN said the recently gazetted regulations requiring credit bureaus to delete adverse information and paid-up judgments would be applied across commercial and consumer credit bureau databases simultaneously but rental payment profile data, which provided a monthly payment account of tenants’ payment status, including paid on time, paid late, paid partially or not paid, would not be affected.

Without rental payment profile data, the credit amnesty would be alarming for all landlords, it said. Another trend highlighted by TPN’s latest Commercial Rental Monitor was the continuation of the trend of tenants migrating towards more affordable rentals.

TPN said 38 percent of commercial tenants now rented for less than R10 000 a month, which was an increase from 35 percent in the previous quarter and 29 percent two years ago.

The credit bureau stressed that as this more affordable segment of the market continued to grow, it was important for landlords and property managers to take cognisance of the fact that it was now the most challenging segment in which to collect rent.

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