A practical guide for South African residential and commercial landlords

Making money out of property involves far more than buying and selling. Much of the wealth in a property portfolio is created, or destroyed, in the years between buying a property and selling it. How well you manage your properties determines your vacancy rate, your bad debts, your maintenance bill and, ultimately, the value of the asset when you sell it.

In this article I set out what proper property management involves in South Africa today, the legislation every landlord needs to be aware of, and when it makes sense to bring in a professional to do it for you.

Treat your tenants as your clients

If you want to build a name as a residential or commercial landlord who attracts the best tenants, you need to run your portfolio like a business. In the property business your tenants are your clients. They pay your bond, your rates and your profit, and they should be treated accordingly.

Good tenants stay longer when maintenance requests are dealt with promptly, communication is clear and professional, and the property is kept in good condition. Every month a quality tenant stays is a month without vacancy, re-letting costs and the risk of signing up someone worse.

Finding the right tenant: your most important decision

The single most important part of property management is finding the right tenant and signing them up on the right terms. I regularly hear horror stories about tenants who stop paying and are almost impossible to remove. Tenants like this are the road to bankruptcy in the property game.

Evicting a residential tenant in South Africa is neither quick nor cheap. Under the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (the PIE Act), you need a court order, and the process can take several months while you continue to pay the bond, rates and levies with no rental coming in. Prevention is far cheaper than cure.

Landlords who end up with problem tenants are usually the ones who signed up the first person who showed interest, without doing proper due diligence. The best way to avoid this is to use a reputable letting agent or property management company to find and vet tenants for you. A good agent will handle every aspect of procuring a tenant, including:

• advertising the property on the major property portals and social media, with good-quality photographs and an accurate description;
• verifying the applicant’s identity, employment and income through payslips and bank statements;
• running credit and rental-history checks through the credit bureaux and tenant-profile networks such as TPN, with the applicant’s written consent as required by the Protection of Personal Information Act (POPIA);
• obtaining references from previous landlords and, where relevant, employers;
• interviewing and screening applicants;
• drafting and finalising the lease agreement;
• collecting the deposit and first month’s rental into a trust account before occupation; and
• conducting and documenting the incoming inspection, ideally with dated photographs.

Check the agent before you appoint them. Under the Property Practitioners Act 22 of 2019, anyone who lets or manages property for reward must hold a valid Fidelity Fund Certificate issued by the Property Practitioners Regulatory Authority (PPRA). Ask to see it, and confirm that tenant deposits and rentals will be held in a properly operated trust account.

Apply a sensible affordability test. A common rule of thumb in the South African market is that the rental should not exceed about a third of the tenant’s gross monthly income. A tenant who is stretched from day one is far more likely to fall into arrears.

Signing up on the right terms

A well-drafted lease is your main protection if things go wrong. Always put the lease in writing, even where the law does not strictly require it, and make sure it complies with the legislation that applies to your property:

• Rental Housing Act 50 of 1999: governs residential leases, including the handling of deposits, joint inspections and unfair practices. Disputes can be referred to the provincial Rental Housing Tribunal, which offers its services free of charge.
• Consumer Protection Act 68 of 2008 (CPA): applies to many residential leases, particularly where the landlord or agent lets property in the ordinary course of business. Among other things, a fixed-term lease with a consumer may not exceed 24 months, the tenant may cancel on 20 business days’ written notice subject to a reasonable cancellation penalty, and the landlord must notify the tenant of the upcoming expiry of the lease between 40 and 80 business days before it ends.
• Commercial leases: these are mostly governed by the common law and the terms of the lease itself, so the drafting matters even more. Pay close attention to annual escalations, recovery of operating costs and municipal charges, the tenant’s maintenance obligations, deposits or bank guarantees, and personal suretyships from the directors of company tenants.

For lease agreements you can use to sign up residential and commercial tenants, please click through to the precedent residential and commercial lease agreements on this website. Please finalise these leases with the assistance of a property attorney to ensure that they are suited to your particular property and tenant.

Handling deposits correctly

Deposits are one of the biggest sources of conflict between landlords and tenants, and the Rental Housing Act is strict about them. For residential properties you must:

• invest the deposit in an interest-bearing account with a financial institution, with the interest accruing to the tenant;
• provide the tenant with written proof of the interest earned if they ask for it;
• conduct a joint incoming inspection before the tenant moves in and a joint outgoing inspection before the lease ends, and record the findings in writing. A landlord who skips the incoming inspection seriously weakens their ability to claim against the deposit later; and
• refund the deposit and interest, less any legitimate deductions, within the time limits below.

The ongoing administration

Once the right tenant is in place, there are a number of administrative functions that must be performed every month, without fail:

• Rental collection and statements: collect rent on time (debit orders work well), issue monthly statements and follow up on arrears immediately. The longer arrears are allowed to run, the harder they are to recover.
• Municipal charges: check your municipal account every month and recover electricity, water, sewerage and refuse charges from tenants in line with the lease. Municipal billing errors are common, and sub-meters or prepaid meters make recoveries far easier to manage.
• Income and expenditure records: keep proper records for every property. Rental income is taxable, and expenses such as bond interest, rates, insurance, repairs and agent’s fees can generally be deducted. Depending on your circumstances, you may also need to register as a provisional taxpayer.
• VAT: the letting of residential accommodation is exempt from VAT, but commercial letting is a taxable supply. From 1 April 2026 the compulsory VAT registration threshold increased from R1 million to R2.3 million of taxable supplies in any 12-month period. If you are registered, VAT returns must be submitted on time, and mixed-use properties require an apportionment of input VAT.
• Maintenance: the landlord must keep the property in a good state of repair. Planned maintenance of roofs, geysers, plumbing and electrical installations is far cheaper than emergency repairs, and backup power and water solutions have become a real factor in attracting and keeping quality tenants.
• Insurance: insure the building for its full replacement value, including SASRIA cover for riot and civil unrest damage, and consider public liability and loss-of-rental cover. Review the sums insured every year, and remind tenants that their own contents are not covered by your policy.
• Sectional title and estate obligations: where you own units in a sectional title scheme or estate, make sure levies are paid and that tenants are made aware of, and comply with, the conduct rules.

When things go wrong

Even with careful vetting, some tenants will fall behind. Act early: contact the tenant as soon as a payment is missed, send a formal letter of demand, and if necessary cancel the lease in accordance with its terms and the CPA. If a residential tenant refuses to vacate, you must follow the PIE Act eviction process through the courts.

Never take the law into your own hands. Changing the locks, removing the tenant’s belongings or cutting off electricity or water to force a tenant out is unlawful, and will set your eviction back while exposing you to legal claims.

Should you use a property management company?

If you are not able to manage your properties properly on a full-time basis, I highly recommend that you make use of a property management company. Agents typically offer two levels of service: a letting-only (procurement) service, where they find and sign up the tenant and you manage from there, and a full management service, where they handle everything from rental collection and municipal recoveries to maintenance and inspections. Fees are usually charged as a percentage of the rental collected, plus VAT.

For what I believe is a reasonable fee, a good property management company takes away the headaches of running your portfolio and frees up your time to do what really builds wealth: finding and buying your next property. When choosing one, check:

• that the agency and its staff hold valid Fidelity Fund Certificates from the PPRA;
• that its trust account is audited and that you will receive clear monthly statements;
• how maintenance is handled, including the spending limit above which your approval is required;
• how quickly it acts on arrears and what its arrears record looks like; and
• references from other landlords whose properties it manages.

Whether you manage your portfolio yourself or appoint a professional, remember that the quality of your tenants and the efficiency of your administration will have as much impact on your returns as the price you paid for the property.

Disclaimer

This article provides general information only and does not constitute legal, tax or financial advice. Legislation, tax thresholds and regulations change from time to time, and their application depends on your particular circumstances. Please consult a qualified property attorney and a registered tax practitioner before acting on any of the information in this article.