The percentage of residential tenants in good standing improved to 86 percent in the second quarter of this year, its highest level in five years.
Tenants in good standing are considered to be those who paid their rent on time, those who paid in the grace period and those who fell into the “paid late” category.
TPN credit bureau’s latest rental payment monitor revealed that nationally 71 percent of tenants paid their rent on time and in full in the second quarter. Four percent paid during the grace period, and 11 percent paid late.
The proportion of tenants in the “did not pay” category dropped to 6 percent in the second quarter from 8 percent in the previous quarter. It was as high as 19 percent in the first quarter of 2009.
But TPN warned of the need for ever-increasing diligence in identifying quality tenants.
TPN also cautioned that the proposed credit amnesty would have an effect on historical data on monthly credit and rental account defaults and civil judgments, which could potentially result in less desirable tenants making the grade.
It said this valuable information enabled landlords or their agents to place the best-qualified tenant and limit the risk of non-payment and other damages.
But the proposed credit amnesty would have no effect on rental payment profile data because the monthly payment ratings were a factual account of how the rent was paid and could not be deleted.
“It is relevant, necessary and in fact fair and equitable for quality tenants to have their ‘paid on time’ status reflected for the length of their lease, enabling these tenants to secure future leases post the credit amnesty.”
The cost of a delinquent tenant far outweighed the cost of the process of taking on a tenant. Apart from legal costs involved in removing a delinquent tenant, the average loss of rent was two months, TPN said.
In severe cases, 2 percent of tenants squatted.
It said the potential cost of damages or unpaid utilities also needed to be added to this.
The monitor said rental agents voiced their concern in the first quarter about a growing scarcity of stock, suggesting there was an oversupply of tenants.
However, TPN said the main challenge was still a noteworthy shortage of reliable and/or qualified tenants.
TPN data indicated that the R3 000 to R7 000 rental bracket was consistently the best-performing category, with only 5 percent of tenants in the “did not pay” category.
It said almost 25 percent of tenants rented for less than R3 000 a month and this rental bracket had the highest non-payment rate at 9 percent.
TPN said a further stress indicator was the value of arrears as a percentage of rent on letters of demand.
It said average letters of demand delivered to tenants were for 140 percent of the monthly rent but this increased to 171 percent for tenants in the rental bracket of below R3 000 a month.
Only landlords in the category of more than R25 000 a month fared worse. These tenants had a 9 percent non-payment profile. Only 57 percent paid on time and demand letters for overdue rent signalled a staggering 176 percent of rent on average, TPN said.