24 Feb 2011
Buy-to-rent property investment, although slowed by the recent economic downturn, has lost none of its appeal for those who have traditionally used such investments to build a retirement portfolio - but investors who go this route have to familiarise themselves with the relevant legislation, a whole body of which has grown up to protect both tenants and landlords.
One of the controversial but powerful sets of new laws, are those in the PIE (Prevention of Illegal Eviction) and Unlawful Occupation of Land Act - and the clause here which has caused the most difficulty (to landlords) is that which says that, although it is acceptable to apply to the courts for the eviction of a tenant in arrears on his rent payments, the court has to be satisfied that the evicted tenant has been offered an "equable solution" - which, in practice, usually means that the landlord is able to show that there is other similarly priced accommodation available nearby. If this is not the case, the landlord may well be called on to "grin and bear it", carrying the financial losses himself. Recently in Yeoville, Johannesburg, the owner of a small block of apartments decided that the time had come to renovate, upgrade and improve his rentals. All the tenants were given three months notice (not in writing but verbally). However, they refused to leave and took their case to an NGO. The landlord, on applying to the High Court, was granted an order. When the tenants appealed against this in terms of the PIE act mentioned above, the judge ruled in their favour. (The tenants had failed to arrive in court to defend the case as they thought that their NGO would do this on their behalf. This excuse was accepted by the court.) The court based its decision on the fact that the tenants had nowhere else to go. The case shows, yet again, that (a) it is essential to have all legal matters relating to property in writing, and (b) that if a lease is to be terminated against the tenant's wishes, the landlord has to be able to prove that he has presented the tenant with "appropriate" rental alternatives, i.e. in the same price range and area - and has assisted them in applying for these. *Lanice Steward is the MD of Anne Porter Knight Frank