Picture: Cilna Steyn, managing director SSLR Inc
The Covid pandemic has amplified the tension between landlords and tenants as thousands struggle to settle their rental debt due to a loss of income or reduced income. It is critical therefore to find the right balance in legal protection for both parties.
Longstanding tug of war
For as long as rentals have been around there has always been a tug-war between the rights of the landlord and the rights of the tenant. A person’s experience of a rental agreement will differ depending on which side, and in which capacity they are part of a rental agreement – this also influence their understanding and interpretation of the relevant laws.
In South Africa, since the promulgation of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act in 1998, the main sentiment from landlords, especially in residential properties, was that the law unfairly favoured the tenant. Eviction attorneys are used to landlords saying things like “Landlords just does not have rights against a non-paying tenant” or “the law protects illegal occupants”.
Financial impact of Covid pandemic
2020 is the year where this tug-war between landlord and tenants’ rights have been amplified even more. As soon as the country went into lockdown because of the COVID 19 pandemic, there were immediate talk about rental payments and whether a tenant would be allowed to cease rental payments if they do not receive an income or if they are unable to utilize the property as a result of lockdown.
At the same time landlords had to find creative solutions to still meet their obligations with regards to the property such as bond payments, payments of rates and taxes, payment of utilities and many more expenses that are incidental to property ownership. Even though many landlords were afforded deferred payments from their banks with regards to their home loans, it is important to keep in mind that all these deferred payments carried severe interest components. It is not true that there were banks that froze bond payments with no penalty or increased interest component to the owner of the property. This scenario also applied to rates and taxes or other property-related expenses.
The number of defaulting tenants due to financial difficulty increased globally during 2020. Countries with the financial means to support the property owners were able to freeze rental payments, but unfortunately this was not the case in South Africa. Many tenants had low to no income during lockdown, and even as restrictive measures eased, thousands are left with reduced income or have lost their jobs altogether. With low or no financial support from the South African government, many tenants find themselves in a position where they are unable to pay their rent even if they desperately wanted to.
Also read: Rental market in trouble
Need a rental economy
It is true that some landlords use the rental income on a property to pay of their bonds, or simply make a profit. However, it is crucial to appreciate that this is what economic activity is and that in a free country, one is entitled to profit from any business form, including rentals. If it were not for this profit and the retention of the capital asset that a landlord has, there would not be any rentals in South Africa.
This would have multiplied the housing crises in South Africa to a point where homelessness would been an even bigger problem than it already is. For a country to provide safe accommodation to its citizens, it relies heavily on property investors who are willing to invest in buy-to-let properties. The moment these rights are removed there won’t be a reason for a property investor to buy a property to rent out and the effect of this would obviously be devastating.
Balance the right to occupation vs the right to ownership
South Africa has a lot of legislation that protect the right of occupation such as the PIE Act, Extension of Security of Tenure Act 62 of 1997 (ESTA), the Consumer Protection Act 68 of 2008, The Rental Housing Act 50 of 1999 and many others. A property owner can easily feel like his rights are removed unfairly in comparison to the protection of the rights of the occupant. However, despite all the laws relating to rentals and specifically to protect the right of occupation, this right is a personal right. It is a much weaker right in comparison to the right of ownership, which is a right that the owner has.
It is important to appreciate that the purpose of any legal system, and South Africa’s legal system is no exception, is to bring a balance of rights between the rights of citizens. We cannot possibly imagine a situation where a landlord would be able to evict an illegal occupant, or a non-paying tenant without a court order. At the same time, we cannot imagine a world where a landlord is forced to provide free or almost free accommodation for a tenant who is unable to pay rent.
Our lockdown regulations made it clear that communication between landlords and tenants is of paramount importance. This should not be limited to the COVID 19 pandemic, clear transparent communication should always be the most important part of a rental journey.
During the pandemic, many landlords found ways of supporting their tenants who could not pay and similarly many tenants made plans to pay what they could to keep the landlord afloat as well. However, every situation is unique and no law can ever give a blanket answer to every potential situation that could arise between a landlord and a tenant.
The balance of rights is essential. Rentals in South Africa are crucial for the survival of the economy as well as for the safety of all citizens. Landlords and tenants are required to apply the principals of Ubuntu and see the other party as a human being and then make the decisions with regards to the rental journey with that in mind.
About the author: Cilna Steyn is the managing director of the property specialist law firm, SSLR Incorporated, which she co-founded in 2008. She also acts on the panel of experts for the Law Society of South Africa’s Legal Education and Development, is one of the drafting attorneys of the TPN (Tenant Profile Network) Residential Lease Pack and authored “The Landlord’s Guide – Property Rental and Eviction” in 2015.