Gauteng Business News

Send  Share  RSS  Twitter  19 Sep 2014

PROPERTY: Is Rental Insurance the Solution to Landlord Risk?


Recent Gauteng Business News

The rental property market in South Africa is big and growing as more and more people either don’t want to or can’t afford to purchase a home to live in. On bright side the market appeals to landlords wanting to earn a passive income on their rental properties while tenants are exempt from the hassle and cost inherent in property maintenance, says Harry van der Linde of Leapfrog Pretoria East

On the other hand landlords face the risk of non-payment by tenants as well as property damage and even theft. Tenants aren’t as vulnerable but, can fall prey to unscrupulous owners who don’t do proper maintenance or illegally hold on to security deposits. Added to this tenants are often asked for two or even three month deposits – something many South Africans struggle to gather.

“When it comes to rentals we agents most often have to deal with issues surrounding security deposits and non payment of rent,” explains Harry van der Linde of Leapfrog Pretoria East, “the issue of money often makes people quite emotional – especially when the rent’s not coming in -while there are also a lot of misconceptions out there as to how deposits work”.

A rental revolution?

As with any contract both parties stand a lot to gain, but also face certain financial risks – risks a company called Rentshield aims to mitigate by offering ‘zero deposit’ leases and financial protection for landlords.

How it works for property owners

Rentshield is a product of Torus Capital and offers landlords a number of free services such as an online tenant vetting facility and conducting property inspections. According to their website they offer to protect the landlord in terms of non- payment by the tenant for up to three months as well as repairing property damage caused by the tenant (up to the value of one month’s rental). The company will also undertake an eviction process, if necessary, covering the legal fees to the value of R50 000.

“When it comes to selecting a tenant the key thing is to vet the person properly – financial protection is a great safety net, but to be honest you likely won’t need it if you’ve checked out your tenant properly,” says Harry.

How it works for tenants

The main benefit for tenants who qualify for Rentshield is of course the ‘zero deposit’ rental option offered. Kruger believes that “While I by no means insist on a three month security deposit I’ve certainly found that the kind of tenant who’s been disciplined enough to save up for it is generally a better lessee. Based on that I’d be wary but by no means would I deny a tenant who qualified for a zero deposit option and could prove it”.

At the end of the day companies like Rentshield offer insurance and, like with all forms of insurance it’s important to read the fine print. “Personally I think the idea could work quite well, if of course people did their homework and understood exactly what they’re covered for and what not,” says Harry.

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