Be gentle with good tenants in tough times

Businesses are closing by the fistful, private property tenants are reneging on rent and eviction processes are changing regularly.

Yet a survey of East London landlords reveal that many of them will do everything financially feasible to keep tenants in place as they ride out the coronavirus pandemic.

Alan Hawkins is both a landlord and a tenant. He owns The East London Coffee Shop and pays rent, but also has a few properties that he rents out. Hawkins, speaking from his position as a landlord, said honest communication is essential.

If tenants who have honoured lease agreements and always paid on time are now suddenly in financial trouble they should be treated with great empathy, he says.

“Personally I would much prefer to have a good tenant than an empty building. It is worth negotiating a way ahead, to the extent of waiving a portion of rent, or giving a partial rent holiday. However, as landlord I have costs that I cannot avoid, particularly rates. If I can get a tenant to pay a portion of what is owing, then it is a win-win.”

For Hawkins, eviction is a lose-lose, except if a tenant has been playing up for many months, and now uses the pandemic as yet another excuse. Most people employed by state institutions have not felt Covid-19’s impact on salaries, and if they blame it for non-payments then there must be other reasons.

But many business owners and employees have felt the pandemic's bite, with trading often reduced to zero and salaries slashed.

“Bad tenants are not worth keeping: good tenants are. Losing a struggling, previously fault-free tenant, often means months of searching for another, lost rentals, and time and effort to build a relationship. Definitely better to take the pain, keep them in place, and keep monitoring the situation.”

Christo Barnard is a partner at Barnard Majuva Inc, which has offices in Mthatha and East London. He said a tenantless building can be a disaster. He is aware of several large vandalised buildings and homes in Mthatha.

Everything movable had been stolen, and in some cases even built-in cupboards, doors and windows. He said the eviction process was fluid and a landlord should consult a legal specialist before evicting. Landlords who have bonds and are in financial difficulties, or predict that they might be, should contact their lenders. Most banks have relief packages in place to help beleaguered borrowers.

Russell Seymour is one of East London’s largest commercial and residential property owners. He believes in making every effort to keep tenants in a position where they can recover quickly once the pandemic dissipates.

“One problem is that defaults and business failures are closely linked. I always try to get a tenant to take a long-term view, especially with Covid-19. It is far better to renegotiate an agreement than for them to close a business.”

He said in some cases Covid-19 had been the final nail, especially as there was no recovery on the horizon. Some great businesses had closed, leaving property spaces vacant for entrepreneurs who had an appetite for risk and the money to afford to sit back and wait the pandemic out.

Ryan Gaylard of Pam Golding Properties in East London said he was aware of some landlords who are “not budging — they demand their rent and will not negotiate”.

“It’s not going to help threatening a person or business that simply does not have the money. However, if action is unavoidable take it now. And that goes for selling a business or a home. It’s not worth hanging on, staring down the barrel, and then still being forced to let it go for well below what it is worth.”