The importance of a lease agreement

previous articles and several other forums, although one may attribute it to the endemic “January Disease”‘.
Several property analysts have put forward their suggestions on the best methods of tackling this problem in the short and long-term.

This article is an attempt to deal with the problem on a person-by-person basis while allowing those entrusted to solve it on a mass level implement their strategies.
The best way to ensure certainty is through lease or tenancy agreement. The importance of a lease agreement can never be over emphasised.
In this particular article, we refer only to the rent review clause. The absence of a lease with a properly drafted rent review clause limits the leverage either party can have when it comes to rent review.

The landlord in an oral agreement either reviews upwards arbitrarily and unexpectedly or fails to review at all because of uncertainty over when to review the rent.
The rental review clause therefore gives prior knowledge to both the tenant and landlord as to when a review is expected.
It gives both parties ample time to gather their reasons why the rent should be reviewed upwards or not.
The negotiations will not be as uncomfortable or one sided as those common in surprise reviews.

It is an unfortunate truth that a large segment of our rental market is not covered by lease agreements.
To make rent increases more palatable for this segment of the market, the landlords are encouraged to offer letters of intent to review maybe three months before the intended increase is to take effect.
It will be prudent to offer the reason for the basis of review, be it market rate or inflation based.

It allows the tenant more time to investigate the reason and prepare financially and mentally for the pending review.
The negotiating party must always be equipped with the prevailing market prices before presenting their extenuating circumstances.
It allows the rent negotiations to be progressive, as both parties will be aware of the market rate.

If it is the landlord proposing an increase in rental, a presentation of the higher prices being charged on similar properties coupled with the presentation of the actual increase one wants to effect will allow the tenant to appreciate ones consideration for their tenancy.
If it is the tenant wishing to contest the increase, a presentation of the general rents being charged for similar properties coupled with an understanding and appreciation of the unique features of the

subject property, will give the landlord an appreciation of the care one has on the particular property.
It also enlightens them about the options available. At this point one can offer to pay the average rate of rental charged in similar properties.

If the landlord or managing agent has been negligent in maintaining the rents at or close to market rates, it is improper or unfair to punish the tenant by raising the rental exponentially to match market prices.
Landlords in such instances feel as if they were being prejudiced of income for such long periods and try to recoup lost income by immediately raising rents to match market prices because the tenant

had been benefiting from the low prices.
Such a method is normally counter-productive and breeds disputes. The most effective way is to notify the tenant of intention to match market prices and propose to raise the rentals in stages.
One can raise it by a reasonable figure every three months until it matches prevailing market rates.

This method allows the tenant to understand the landlords intentions while ultimately achieving the intended goal.
The most effective ammunition a tenant can have in a rent review negotiation is a history of good tenancy.

This does not only involve timely payment of rentals and bills, although such a history will significantly improve one’s chances of achieving the intended goal.
Good tenancy in essence also involves acts of ownership, where the tenant intentionally improves the condition of the property they reside in.

Such actions must be communicated to the landlord, firstly because of their right to know what happens on their property and mainly because the information can only benefit the tenant if the landlord is aware of improvements.

My experiences tell me that most landlords are more concerned about state of property and its overall market value than just rental return.
It is difficult for landlords to increase rent on good tenants, where such increases are proposed, landlords are normally willing to listen and accommodate the tenants mitigating circumstances.