What can you do when your tenant falls into rental arrears?

Nobody wants to fall into rental arrears, but unfortunately it happens. Times are tough, and the economic climate isn't forecast to improve for some time yet, so it is all too common for tenants to default on their rental payments.

This is a stressful situation for both landlord and tenant and it must be approached with caution and a full knowledge of the rights of each. 

What's in the lease?

Depending on the specific lease agreement, in general, if a tenant is seven days late with their rental payment, they are then deemed, in the eyes of the law, to be in breach of the lease agreement.

It is up the landlord to inform the tenant in writing of the arrear rental, but the landlord does not have the right to immediately evict the tenant. Through this official notice, the landlord is giving the tenant the opportunity to resolve the breach of the lease agreement. A landlord can blacklist the tenant with credit bureaux at this point.

In general, if the tenant does not resolve the arrear rental within 20 days, the landlord can consider cancelling the lease, and suing for the arrears. The landlord may attach the tenant’s belongings in terms of the landlord’s tacit hypothec. They can also begin the eviction process. A landlord cannot evict a tenant without following the correct legal procedure. For that reason, if a tenant has defaulted on their rental payments, a landlord should obtain legal assistance as soon as possible.

Tacit hypothec

If a tenant falls into rent arrears, common law grants the landlord “tacit hypothec” over the tenant’s goods on the property. What does this mean in plain English? “Hypothec” is an old term, dating back to the 16th century and having its origins in French, which has survived in legal jargon and means “a right established by law over a debtor’s property that remains in the debtor’s possession”. Tacit means “implied” or “understood without being stated”. 

When might the landlord’s tacit hypothec apply?

The provision for tacit hypothec is enshrined in Section 32 of the Magistrates’ Courts Act. Section 32 allows a landlord to apply for the attachment and, in certain circumstances, for the removal of a tenant’s movable goods in the leased premises, in lieu of rent owed. A landlord may choose to invoke Section 32 because it can be more effective than a rent interdict summons. Understandably, tenants will not want to see their possessions impounded and may respond more swiftly to this threat than to an interdict for payment of arrears.

How does it work?

The landlord applies to the Magistrate’s Court for an attachment under Section 32 in securitatem debiti – in other words, to secure the debt. However, if there is reason to suspect the tenant might abscond with the goods, the landlord can request an immediate order. This allows for removal of goods as security for unpaid rent without giving notice, because such notice could result in the tenant removing things in advance, thus rendering the landlord’s tacit hypothec worthless. 

Burden of proof

It is the landlord’s responsibility to prove grounds for a Section 32 order. If the application is opposed and a dispute arises, resolution is based on the balance of probabilities. If this fails, there must be substantial doubt regarding the landlord’s case for the attachment to be set aside. Therefore, the landlord’s right to enjoy the rental income from a property is protected, but that right may not be abused by invoking Section 32 without due cause. In this way common law seeks to treat all parties equitably.

Costs and benefits of collecting arrears or invoking the tacit hypothec

As with anything in business, it's important for landlords to weigh up the costs and benefits of any action taken. Loss of income through rental arrears is never pleasant but will the cost of recovering the lost rent be worth the effort? The benefit of invoking the landlord's tacit hypothec is that it compounds the effectiveness of the eviction procedure. A tenant, particularly one with a history of flitting, may not be unduly fazed by an eviction notice. The threat of losing belongings may be taken more seriously. It adds litigation pressure and puts the landlord in a better bargaining position, resulting in more likelihood of the tenant meeting the rental demand. If the tenant has little of any value to attach, the landlord can apply for a long-term order. This is binding for 30 years against the occupier's assets or salary, so there is no escaping!

On the other hand, there are legal costs involved. Although the tacit hypothec gives the landlord a bargaining chip, assets are not cash. It may be some time before the landlord can recover arrears and costs. If all else fails and the landlord takes the tenant's goods to auction, to realise the rental arrears, the Sheriff costs can be in excess of R5 000. There are also storage costs to consider while holding the goods as collateral. 

Time to cut one's losses?

If the rental arrear is not substantial, e.g. R10 000 – 15 000, it may not be worth pursuing.  This is not to suggest that tenants should get away with not paying their rent. But if the proper procedures are followed, i.e. the tenant is given a chance to rectify the breach of the lease agreement, and the rent is still not forthcoming, it may be best to begin the eviction process and leave it at that. The sooner the recalcitrant tenant is off the property, the sooner a new occupier can be found and the income stream can start flowing again. 

Eviction Lawyers South Africa can help

However, if your loss is significant, we can help you recover your rental arrears, using the landlord's tacit hypothec if necessary Cape Town law firm SD Law & Associates are property and eviction lawyers in South Africa, with offices in Cape Town, Johannesburg, Durban and Pretoria. We uphold everyone's constitutional rights and act for both landlords and tenants. If you’re a landlord with unpaid rent and you would like to take action, or if you are in rent arrears and think you may be subject to a Section 32 order, we can help. Contact Cape Town Attorney Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za.