Renting out your property can be a risky business: if you land up with the wrong tenants, you could be saddled with late or non-payments, damage and a potential for squatting.
To mitigate against such risks, many landlords opt to go the letting agent route, expecting the agents to do the heavy lifting to vet suitable tenants, write contracts and manage the deposits.
But there’s always an inherent risk. And if the agent hasn’t done their work, the landlord is saddled with the proverbial baby that often ends up in court. It’s the reason specialist companies such as Tenant Profile Network, also known as TPN, thrive: they assist landlords and estate agents to choose the right commercial and residential tenants by conducting credit and other checks on prospective tenants.
When landlords approach agents (or vice versa), they have a reasonable expectation that the agent will conduct the requisite checks to ensure they are the right fit, since they’re paying commission for that service.
Mandy Jamieson, an associate with Keller Williams Advance, explains: “If your agent is going to be getting money for placing the tenant, they need to do the right checks and introduce the clients to the landlord. I ask my potential tenants for permission to discuss their information with the landlord. The responsibility is mostly on the agent - they are mandated to find suitable tenants. It’s their job.”
Jamieson says it’s no guarantee if agents do the correct checks that it will be a perfect relationship - tenants might look great on paper, but things happen: people lose their jobs, they might need to get out of their leases early due to unforeseen circumstances, etc.
However, credit and other background checks offer an overall picture of the tenant’s conduct. And they raise vital red flags that landlords - and their agents - shouldn’t ignore.
Neeran Naidoo’s bitter dispute with an estate agency is a lesson in what can go wrong when tenants aren’t properly vetted. In 2017, Naidoo asked his preferred rental agents to advertise his furnished cottage in Hout Bay. Instead, an agent from Soukop contacted him and told him they had suitable tenants. He felt uneasy about that but agreed to sign with them.
The couple moved in on March 1, but there were red flags aplenty from the start: the tenants couldn’t afford to pay the deposit in full, so Naidoo charitably agreed that it be paid over months, and they had a dog, which he agreed to.
And that’s where things soured: not only could the tenants not afford the rent from the very first payment, they also had a second dog and the animals caused damage to his deck, floors and blinds.
Fortunately, eviction wasn’t needed and the tenants moved out after two months, but Naidoo was now out of pocket, significantly so: the tenants had caused around R10000 damage to his property and he was left without the income he would have generated from them for the eight-month lease.
A bitter spat ensued between the dealer principal of Soukop and Naidoo.
The agency blamed a junior agent who left their employ soon after for not doing the requisite checks - the tenant who signed the lease was technically insolvent and his partner had seven judgments against his name.
But Jamieson says the buck stops with the agency and they cannot blame a junior. “As per the Estate Agency Affairs Board (EAAB) code of conduct, trainee or candidate agents need supervision at all times from a full-status estate agent, and the responsibility will always be on the agency. Ownership always lies with the principal. Agents need to do due diligence and the TPN checks - but if it goes to court, the owner ends up fighting the tenants.”
She says it’s not uncommon for agents to say they’ve done the checks when they haven’t been done. And while landlords should take some responsibility for their properties, the fact that they are paying for a service means they have a reasonable expectation that agents would have done their jobs properly.
When Naidoo asked for the reference checks, he discovered that a TPN credit report was only conducted six weeks after the tenants had already occupied the property (and after he had requested it). Naidoo said Soukop was negligent, did not conduct reference checks and recommended a tenant that was not in good standing.
Soukop claimed the TPN report was done before signing the lease, but it could not be found on the trainee agent’s computer. But Naidoo says TPN themselves had no trace of the report, except for the one that was requested six weeks after the tenants moved in, and that Soukop had based the approval on the client’s three-month banking statements only “which showed large deposits into the accounts”.
At one stage, they asked him to sign a cancellation of lease contract “without prejudice” stating their willingness to find a replacement tenant “at no cost to yourself” and a refund of the R15800 commission as full and final settlement, and that he withdraw his complaint to the EAAB and all media. Soukop claims they had offered to pay back the commission on condition that Naidoo stopped his “smear campaign”, but he refused their offer.
Last week, Naidoo contacted me to say he won at the Small Claims Court. The advocate presiding over the case found that the tenants were “hopelessly insolvent”.
“While large amounts were deposited into the account, the funds disappeared just as fast,” Naidoo said. “Advocate PA Corbett said you don’t need to be an accountant or auditor to see that the rent was unaffordable, and Soukop should have known this.”
Corbett said the TPN report painted an “alarming” picture of the tenant’s credit history. He said Naidoo had suffered losses far in excess of the R15000 that can be awarded by the court as a result of a breach of agreement by the defendant, Soukop.
Naidoo only received R15000 as the court deals with civil matters where claims are capped at under that amount. But the experience has left a bitter taste in his mouth.
Soukop, through various people, claimed Naidoo was attempting to smear them and that this was “harassment on a different level”. They claim all issues “were dealt with” and that there was no further response.
Despite numerous attempts at eliciting comment from the EAAB about why it failed to sanction Soukop over the fiasco, none was offered.
* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.