THE LANDLORD’S NUMBERS GAME: PROSPECTS OF SUCCESS VS PROSPECTS OF RECOVERY

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When the leasing of a Property goes wrong, the landlord often finds themselves faced with two issues:1) An Occupier who has breached the terms of their lease agreement by defaulting on the stipulated payments, and 2) A continuously ballooning amount of unpaid rental arrears, often inclusive of municipal rates.

While the need for the eviction of the unlawful occupier is clear, it is the issue of the unpaid amounts relating to the lease agreement that requires a more in-depth analysis. When looking at the issue of unpaid rental arrears, it is of the utmost importance that an attorney discusses the prospects of success versus the prospect of recovery with the landlord.

In the world of lawyers, litigation and court cases, Prospects of Success refer to the chances of achieving a desired legal outcome. In essence, the likelihood of getting a judgment in support of the reason you approached the courts. With reference to the two main issues faced by landlords as highlighted above, the prospects of success would deal with the likelihood of getting an Eviction Order against the tenant based on issue one and the likelihood of getting an order confirming that the tenant owes the landlord the outstanding arrear amounts relating to the lease. Various factors are to be taken into consideration when weighing the chances of success relating to the matter. Such as facts of the case. What has occurred up until the present moment? What is the current legal position? How have similar instances been adjudged by the courts?

When embarking on such an exercise, it is vital that your attorneys have a comprehensive and expert understanding of the law, and all the judicial processes and that the evidentiary component of matters is addressed by ensuring that all relevant evidence and documentation are available for purposes of proving your case. For example: Lease agreements, statements by the rental agency (if any), municipality rates and bills, as well as communication between the landlord and tenant. This increases the probability of obtaining judgments that are sought by the client.

Prospects of Recovery, on the other hand, refer to the likelihood of actually being able to recover from the tenant, all the arrears owed as per the outstanding balance, as well as the legal costs incurred in order to get a judgment confirming the tenant’s indebtedness to the landlord for failure to pay. When weighing up the prospects of recovery of such amounts, it is important to consider the financial position of the Tenant: What, according to the tenant, is the cause of their failure to uphold their duties and obligations as it relates to the lease agreement. Whether there are any sureties or guarantors to the lease that you could hold liable for the tenant’s debt. One has to understand ultimately that the financial position of the client has a direct link to the recoverability of the outstanding debts, and as such, the attorney and client need to speak on these matters. This ensures that the client makes a well-informed decision on how to proceed in relation to arrear rental.

ENHANCING PROSPECTS OF RECOVERY

  1. Ensure due diligence on potential tenants by scrutinising their financial background, creditworthiness, and business reputation. By doing so, landlords can make informed decisions on taking legal action, considering the likelihood not only of obtaining legal success but also recovering the arrears, therefore best protecting their property asset values.
  2. Determine whether or not the tenant has assets that could be potentially sold by the Sheriff to satisfy a judgment obtained against the tenant. A tenant that has assets (such as couches, TVs and other valuables) is more likely to be able to satisfy a judgment obtained against the tenant rather than a tenant that moves into a furnished rental property.
  3. Determine whether or not the tenant is permanently employed and obtain the details of the employer. A landlord can attach the emoluments of a tenant (such as the tenant’s salary or wage) to pay off a judgment obtained against the tenant.

Disclaimer: The above does not constitute legal advice, and you are advised to seek legal advice.

Written by Mongisi Khumalo