Landlords beware: squatters, slow payers and non-payers are on the rise

New information from the TPN Squat Index shows  the country is witnessing a worrying uptick in squatting, with  tenants failing to pay their rent while continuing to occupy properties.

The trend is becoming an increasingly significant concern for landlords, property managers and investors. The TPN Squat Index has shown that the number of tenants classified as squatting has increased this year.

“The index increased from 3.48% in the fourth quarter of 2023 to 3.7% in the first quarter of 2024, and then to 3.71% in the second quarter,” the index shows.

The report defined a tenant who has not made a rental payment for three consecutive months and is still occupying the property in the fourth month as a squatter.

“These tenants pose a real risk to investors and property managers, particularly if action is not taken promptly through the correct channels and within the required regulations as property owners face financial risks when tenants do not meet their rental obligations,” the report stated.

While squatting is a pressing issue, broader tenant payment behaviour in South Africa reveals a mixed picture.

According to the TPN report, the majority of tenants are still managing to meet their rental obligations.

As of the second quarter of 2024, 83% of tenants were in good standing which is an improvement from the previous quarter when 82.83% of tenants were in good standing. 

Despite this improvement, there are significant differences between tenant groups, based on rental price bands.

Tenants in higher rental brackets tend to perform better in terms of timely rent payments. 

“Tenants in the R7,000-R12,000 rental value band are the best performing when it comes to meeting their rental obligations. Most - 88.58% - are in good standing, boding well for their landlord’s cash flow while 75.87% pay their rent on time, and 9.44% pay late. Only 3.56% of tenants in this band failed to make any payment towards their rental in the second quarter,” the report explained. 

In contrast, tenants in lower rental brackets have find it harder to fulfil their rental obligations.

“For tenants paying R3,000-R7,000 a month, the proportion in good standing slipped below the national average in the second quarter of 2024. While the majority (82.17%) were in good standing, 5.57% did not make any rental payment, and 12% made a partial payment.

This group also accounted for the most late payers, with the highest percentage paying late but still meeting their rental obligation at the end of the month,” the report noted. 

The TPN report highlights regional differences in tenant payment behaviour with provinces such as the Western Cape, the Eastern Cape and the Northern Cape having the most tenants in good standing.

“The Northern Cape, in particular, boasts the highest proportion of tenants paying their rent on time, with 88.94% in good standing,” the report highlighted.

In contrast, the rental payment picture is more mixed in Gauteng and KwaZulu-Natal, the two provinces with the most tenants.

Gauteng saw a slight decline in the percentage of tenants in good standing, from 81.83% in the first quarter to 81.73% in the second quarter. KwaZulu-Natal, on the other hand, continues to struggle with payment issues.

Despite a slight improvement from the previous quarter, only 77.46% of tenants in the province were in good standing by the second quarter of 2024. The province also saw nearly 8% of tenants failing to make any rental payments, and 14.6% making only partial payments.

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