HOMEOWNER’S INSURANCE FOR LANDLORDS

Apart from paying off a bond on a rental property, property investors/landlords are usually also paying for homeowner’s insurance. What is homeowner’s insurance? Homeowner’s insurance covers the property owner against damages to the structure of the property. This damage could be caused by flooding, fire, wind, hail or other natural causes.

However, the above is not the case with all homeowner’s insurance policies. If you have a standard homeowner’s insurance policy, you might not be protected against any damages that occur while the property is occupied by a tenant or empty. Additionally, this policy might also not cover you for loss of rental income when the property cannot be occupied due to damages.

It’s important to take note of the terms of your policy. Most banks won’t approve a bond unless you have homeowner’s insurance, however, if you are a landlord, it would be wise to check the specific terms of your policy, as you need to ensure that your insurer is aware of the fact that your property is occupied by tenants and not by you, the owner. It’s also important to check if there are any provisions in your policy which prevent you from renting to a certain category, for example, students.

It’s also very important to check if the sum insured stated on your policy is the full replacement cost of the property, and not just its market value, as this could be higher or lower.

The correct coverage might be more expensive, however, paying a little more on your premium is better than finding out that your cover is not valid in the event of a disaster hitting your property. It’s important for new homeowners to know that they do not need to accept the homeowner’s insurance offered by their bank; they are entitled to shop around for the perfect insurance for their needs and requirements.

Keep in mind, you might not have as much flexibility if your property is situated in sectional title schemes because there will be only one homeowner’s insurance policy for the whole building or complex. The premium will have to be paid either annually or monthly by all the members of the body corporate.

Additionally, there are several other insurance matters for landlords to be aware of, which include household contents that belong to tenants that must be insured by them; the landlord is not responsible for any damage or theft of tenants’ possessions. However, if you are renting your property furnished, you will need to take out a separate household contents policy to cover the furniture and equipment that belong to you.

In conclusion, if you are renting your property, always make sure that you check your policy, to save yourself both time and money in the event of damage to your property.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

IS THE TENANT OR LANDLORD RESPONSIBLE FOR THE WATER LEAKS?

Questions, and sometimes disputes, often arise between landlords and tenants regarding where the responsibility lies with the maintenance of a property. The simple answer is that tenants can generally only be held responsible for repairs/replacement on the property if the damage was caused by the tenant’s actions, or items that have a short life span, such as light bulbs.

On the other hand, alarm systems, auto gates and doors, locks, fixtures and fittings, appliances, or anything provided to the tenant are generally the responsibility of the owner to repair, unless damaged by the tenant.

Fair wear and tear

Damage due to fair wear and tear is the owner’s responsibility to correct. This includes situations where the property has, over time, experienced wear due to its use or age.

Examples would include:

  1. Fireplace chimneys: The landlord should maintain the fireplace e.g. having the chimney cleaned at appropriate intervals. Gardens, however, would require the tenant to do general maintenance.
  2. Blocked drains: This is usually due to tenant usage making it the tenant’s responsibility, but if blockage is due to tree roots, it would be the landlord’s responsibility.

Regarding appliances, as with any fixture or fitting, the landlord is responsible for repairs to appliances provided under the tenancy agreement unless the damage was caused by the tenant’s deliberate actions or negligence.

Tenants should report any damage on the property. If they fail to do this, they could find themselves held liable for any further damage due to lack of immediate attention to the initial problem. Furthermore, tenants are obliged to provide access for contractors to effect repairs.

Conclusion

If there is a water leak on the property, it would most likely be the landlord’s responsibility to fix. It is advisable for tenants to read and understand the lease agreement fully and for landlords to list as much as possible that needs to be maintained by the tenant. For example, if the unit has a garden that the tenant is responsible for maintaining, this should be mentioned in the lease.

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RENTING PROPERTY TO FOREIGNERS

Renting property in South Africa is a straightforward process. The country has a vast selection of rental accommodation including bachelor flats in apartment blocks, Victorian cottages, stand-alone houses with big gardens, and semi-detached units in modern townhouse complexes.

In South Africa, the right of a foreigner to purchase immovable property was restricted in the past by the Aliens Control Act. These restrictions were uplifted in 2003 by the new Immigration Act (“the Act”) which repealed the Aliens Control Act and many of its restrictive provisions and now clearly defines who a legal foreigner is and who is not. In short, a legal foreigner is a person in possession of a valid temporary residence permit or a permanent residence permit approved by the Department of Home Affairs.

The new Act makes provision for various temporary residence permits to be issued to foreigners, including amongst others:

  • A visitor’s permit
  • A work and entrepreneurial permit
  • A retired person permit

In principle, a landlord or tenant can legitimately lease or sell immovable property to any person recognised under the Act as a legal foreigner.

That said, foreigners working in South Africa with a legal work permit, are not regarded as “non-residents” by the South African Reserve Bank. They are considered to be residents for the duration of the period of their work permit and are therefore not restricted to a loan of only 50% of the purchase price.

It is also important to take note that the Act criminalizes the letting or selling of immovable property to an illegal foreigner by making this transaction equivalent to the aiding and abetting of an illegal foreigner and is such an act classified as a criminal offence in terms of the Act.

In conclusion, a legal foreigner may let or buy immovable property in South Africa, provided that he is the holder of either a legal temporary residence permit or a permanent residence permit approved by the Department of Home Affairs. Ensure that you enquire from your potential tenant or purchaser whether they are legally present in South Africa and obtain the necessary proof from them before entering into any transaction with a foreigner. Also, take account of the restrictions on local financing, particularly where the procurement of financing is a condition precedent to the agreement.

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This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)