How Frank’s landlord priced him out of his house
“Two years ago we found the perfect home to rent: It had three large bedrooms, a small, manageable garden, large open-plan living area and it was in a great suburb. There was plenty of space for our child and dog run around!” says Midrand tenants, Frank and Leslie (not their real names).
“When we viewed the home for the first time, my wife and I didn’t notice some crucial security flaws: The front sliding door did not lock, two of the bedroom windows did not close properly and the small front gate did not lock. The house, which was located on the street, therefore did not have sufficient security.
“We only discovered this fact the night before we moved in when we went to collect the keys.
“We phoned the landlord to inform him that the front sliding door did not close and his response was: ‘If a criminal wants to get in, he will get in – regardless if the sliding door locks or not.’
“This was the first in a long list of responsibilities our landlord shirked on. Add to this, his lease included a rental escalation of 5% every six months – this meant our rent increased by more than 10% per year! He said to us that if we were good tenants he would consider reducing the biannual escalation after the first six months; this was never brought up again, nor entertained.
“Both my wife and I work for ourselves and when we first moved in, our rent was R8,000 per month, with our water and lights account consistently above R2,500 per month – this meant we were paying R10,500 per month.
“After the first 12 months we resigned for another 12 months due to not wanting to move house so soon after moving in.
“Two months before the expiration of our second lease, our landlord asked if we were resigning for a third year. We told him we would be moving out as the rental would have been R9,724 including R2,500 for utilities (R12,224).
“A few days later he sent us a message to ask if we would like to renegotiate the lease and we said we would stay on if he dropped his rent by R2,000 as we could simply not afford to live in his house anymore.
“His response? ‘I cannot cut off my own nose to spite my face. I invested more than R80,000 in renovating the property before you moved in. The market dictates that my proposed rental (R9,724) is fair.’
“Needless to say we confirmed our vacating date and got on with packing. Our landlord advertised his property for rent in our final month and we watched as a steady number of good potential tenants walked through the door, asked questions and left; two weeks in our landlord dropped his asking price from R9,724 to R9,200. By the third week, he had dropped rental to R8,500. By the end of the month he had still not secured a new tenant and he went on to drop his asking rental to R7,995 – R5 less than what we had signed for two years ago!”
Frank and Leslie’s story is not unique. Landlords, almost by habit, write fixed rental escalations into their leases and, while this is completely in their prerogative to do so, fail to attempt to negotiate or even truly consider the market realities in which their properties are located.
Frank and Leslie’s landlord had an almost-two-year track record of a 100% rental repayment performance, paying well within the contracted due date. They were the typical model tenants.
The biannual rental escalations, despite the tenants’ financial realities (no salary increase in two years), and a micro and macroeconomic environment where the economy was not growing and property prices had stagnated, meant that Frank and Leslie’s landlord was out of touch with his investment.
According to PayProp’s Q3 Rental Index, there was “a significant drop in rental growth and an increase in inflation in September, the last month of the quarter. As a result, a closing of the gap is evident as rental growth returns to levels closer to inflation growth (last seen in November 2016).
Provincially, Gauteng year-on-year rental growth for Q3 2017 was 7.9% – down from 8.4% in Q2 2017.
“I hope he learns his lesson with his new tenants,” says Frank. “He is no better off now than he was two years ago – in fact he is making a greater loss!”