Rent arrears return – how can agents cope?

Preliminary data from the upcoming PayProp Rental Index for Q1 2024 shows a sudden increase in the share of tenants who are behind on their rent, as well as the average amount they owe.

The first metric – the percentage of tenants in arrears – jumped to 18.3% from 17% after dropping for two successive quarters. On average, tenants in arrears owe 77.5% of one month’s rent, more than at any time in the past year.

On the bright side, two provinces beat the trend. Take a bow, Limpopo, where 17.5% of tenants now owe rent, down from 18.8% a year earlier. And in the Free State, which until this quarter had the highest share of tenants in arrears, 22.0% are now behind on their rent, down from 26.7% a year earlier.

But that means arrears are up everywhere else. The biggest rise was in the North West, where more than a quarter of tenants now owe their landlords money – more than in any other province, and up from 22.8% a year earlier. PayProp also recorded big rises in Mpumalanga and KwaZulu-Natal.

Dealing with rent arrears

Arrears metrics are still well below the levels seen in 2020 and 2021, but the rise suggests that affordability pressures on tenants are beginning to tell after prolonged high inflation and interest rates. Inflation is proving to be sticky, so the arrears problem could well get worse before it gets better.

Agents will need to be on the lookout. Placing low-risk applicants, responding to late payments quickly and agreeing repayment plans with tenants will help protect landlords’ cash flow – and agencies’ commission income.

PayProp users have a powerful new arrears recovery solution

As well as these time-honoured strategies, PayProp-powered agents can also use the new communications log feature to help substantiate attempts to recover arrears in case there’s confusion or a dispute. This feature keeps an indelible record of all e-mails sent from the PayProp platform, including automated invoices, payment receipts and arrears reminders – making it extremely easy to establish a paper trail when tenants aren’t paying their rent.

Checking the list of undeliverable messages in the log can identify if and when tenants received or opened an invoice or reminder – or if they aren’t receiving messages, perhaps because they have a new e-mail address. If the tenant doesn’t repay arrears, evidence from the log can ultimately be used to help secure an eviction in court.