The ins and outs of rental payments: Check how far your rent stretches - before you sign a lease
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Even when they have a written lease, tenants are often uncertain about what their monthly rent actually includes, especially if they are renting a flat or townhouse in a sectional title complex.
And they need to make sure before they sign a lease, says Gerhard Kotzé, MD of the RealNet estate agency group, or they could find themselves having to pay for things that were not in their budget.
“The rental market has been through a very tough time in the past 18 months, and while things are starting to improve*, many landlords are still seeking to contain their costs and pass along certain charges to their tenants.
“In sectional title schemes, for example, the owner of each unit is responsible for their own interior maintenance and repairs – which should be covered by the rent being charged if they let their units out. However, to make things easier, especially if they don’t live close to their rental units, landlords can pass the responsibility for some maintenance and repairs on to their tenants, in return for a reduction in rent. But in such cases the lease should stipulate exactly what is expected of the tenant and the value of the rent concession.”
On the other hand, he says, tenants in sectional title developments usually have no responsibility for the upkeep of building exteriors or the common garden or parking areas. “This is handled by the trustees on behalf of the body corporate – which is the collective of all the unit owners in the scheme – and is not covered by tenants’ rentals but by the levies that those owners must pay.
“This does not mean, though, that prospective tenants can forget about levies. Their lease should state whether or by how much their rent will be increased if their landlord's levy is increased - or if the trustees suddenly decide on a special levy to cover an unexpected expense in the running of the scheme.
“In our experience, levy increases have been well ahead of the rate of inflation in many complexes recently, often due to the need for the body corporate to build up a bigger reserve fund in line with legislation that is now being more strictly implemented by the Community Housing Schemes Ombud.
“By contrast, rentals have stayed flat or increased by only a very small percentage since the start of 2020, so it is understandable that landlords would wish to recoup at least some of their levy increases from tenants, and are now providing for this in leases.”
Kotzé says another thing for tenants to consider is how they will be billed for municipal services – that is, whether they will get an individual account reflecting their own, real usage, or whether they will be charged according to a “participation quota” (PQ) that depends on the size of their unit in relation to the whole sectional title scheme.
“These days, most sectional title units do have a separate municipal electricity meter or a pre-paid meter that means tenants will only pay for their own usage. But many schemes do not have separate water meters for each unit, which means that the local authority sends the body corporate a bulk account that is then divided among the residents according to the PQs of their units.
“This can become very unfair as it does not necessarily reflect tenants’ real usage of water at all. For example, the couple renting a three-bedroom flat is very likely to consume less water than the family of four renting a two-bedroom unit in the same complex, but may well be charged more because the PQ of the three-bedroom unit is higher.”
Alternatively, water usage calculated according to PQs might be added to the monthly levies that unit owners have to pay – “and when water charges are increased steeply as they have been this year, landlords could once again be looking to pass on at least some of this extra expense to their tenants. Consequently, prospective tenants should always aim to be billed for their own actual usage of utilities.”
In addition, he says, they must make sure that the sectional title scheme they are considering is in a good financial position overall, “unless they want to risk living in a complex that cannot be properly maintained for lack of funds, or where the units are about to be attached and sold in execution to meet body corporate arrears.
"And finally, we always suggest that they obtain a copy of the management rules for the particular sectional title scheme, before they sign a lease. The rules of a scheme apply to tenants just as they would to owners but are often not specifically noted in lease agreements. And while they generally cover common nuisances such as loud music and noisy parties, they may, for instance, ban all pets or contain other restrictions that would make an otherwise suitable unit undesirable for some tenants.”
*According to the latest PayProp Rental Index, the average rate of rental increase rose to 0,4% year-on-year during the second quarter of 2021, compared to a multi-year low of 0,2% at the end of 2020. However, the Covid-19 aftermath of business closures, job losses and rental oversupply is likely to sustain the downward pressure on rentals for some time yet.