The rental property market appeals to landlords wanting to earn a passive income on their rental properties, but they 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.
Harry van der Linde of Leapfrog Pretoria East explains, “When it comes to rentals, we agents most often have to deal with issues surrounding security deposits and non-payment of rent.”
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 rent). 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 Van der Linde.
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, “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 Van der Linde.