TROUBLE TENANTS

TROUBLE TENANTS

A few years ago when the property market was booming, many people bought second or even third properties as investments. Housing developments and apartment blocks went up everywhere to meet the demand. Prices increased and still people bought. The idea was to let out these properties, preferably to corporate tenants who needed to house their staff members and who could be trusted to pay attractive monthly rentals consistently on time.

Few of these investors had sufficient cash available to pay for their investment properties unassisted. Many obtained loans from banks only too willing to lend in such a favourable climate. Mortgage bonds were registered over the properties with the intention of getting tenant rentals to adequately cover the monthly repayments. This was all pre-2010 and sentiment was good before the Soccer World Cup.

The global economy then collapsed. This caused a protracted recession we are still trying to overcome.

The number of prospective tenants has dropped yet the abundance of lettable property increased. Owners have been left with unoccupied properties and mounting expenses. As recessionary times pervaded the market place, tenants have stopped paying rent citing cash flow problems, loss of work and a variety of other excuses.

Owners had to keep paying their bonds. The banks were unsympathetic. They need to bolster their own income. So property owners have had no option but to evict non-paying tenants from their properties as soon as possible. The idea is to replace them with good paying tenants. A simple proposition of course but very difficult to achieve with the many recalcitrant tenants encountered in today’s market.

One major difficulty faced by owners is the Prevention of Illegal Eviction from Unlawful Occupation of Land Act 19 of 1998 (“PIE”). Broadly speaking the Act is intended to protect occupiers of land from sudden forcible removal. Land owners must respect the potential plight of occupiers and they are compelled to act with circumspection no matter how dire their own financial position may be.

Section 4(7) of PIE is relevant. Essentially it provides that when an occupier of land (this “land” includes houses, apartments, sectional title units, etc) so occupies the land without lawful right, that is unlawfully for more than 6 months :-

• A court can evict them if it is just and equitable to do so;

• The court must consider all relevant circumstances in deciding to do this, including :-

„« whether alternative premises are available;
„« from a municipality of government by way of social grant or otherwise;
„« the rights and needs of:-

ľ the elderly
ľ any children
ľ any disabled persons
ľ households headed by women

Complying with these provisions as a disgruntled owner is an expensive and time consuming process. It is also alien to many owners who are accustomed to the “owner is everything” idea.

Section 4(7) was recently scrutinized in a Cape Town Court case. That case is the matter between Debora Ives v Nawaal Rajah having case number A205/2011 and as yet unreported.

The owner bought a property in Parow at a public auction sale. There was no bond or bank involved. The occupant of the property had lived in the property all of her life. She was confined to a wheelchair, suffered from depression and had nowhere else to go.

The issue was whether the Court could evict her without detailed information from the City of Cape Town (in accordance with Section 4(7)) on whether the City had alternative housing or accommodation for her. She alleged that the owner had not put forward enough information from the City on this aspect and as such had failed to comply with Section 4(7) of PIE. All the owner had done was procure and place before the Court a standard form report from the City stating they had no alternative accommodation which the occupant claimed was inadequate and fell short of the mark.

The Court took an unusual step to resolve this. The Judges called upon the City to send a representative to attend the hearing. Accordingly the City’s witness testified in detail about the City’s attempts to provide housing to the indigent in and around Cape Town. A gloomy picture emerged highlighting the shortages and waiting lists for homeless people. The Court was satisfied that the City did not have alternative accommodation.

After this the Court decided that both the owner and itself had discharged the task of investigating possible alternative housing for the occupant and granted the owner an eviction order.

This long and protracted battle put the owner in a position where he was compelled to spend substantial money on legal fees and waste a substantial amount of time to evict the occupant of the property therefrom. To make matters worse for the owner, the occupant had not been paying any rental whatsoever to the new owner. This case is an example of where PIE can potentially become a major problem for purchasers and owners of property with occupants or tenants therein.

All buyers and owners of property who have tenants or are intending to rent their properties out for residential purposes must take great care at the outset and before entering into any lease agreements that they will not run into difficulties arising from PIE further on down the line.

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