With this in mind, landlords have a few options they can turn to that could offer real benefit to their tenants:
Tenants must play it straight
Both commercial and private tenants may feel completely at the mercy of this sudden and vicious downturn economy. However, if they proceed with caution there are certainly some steps they could take to protect their future.
Transparency and responsibility
The overriding message in this situation for both tenant and landlord is to behave responsibly.
“Unfortunately, we sometimes see that there is not a lot of transparency in how either party is behaving. Landlords are often given payment holidays by their banks, but are then not extending these to their tenants.
“Tenants, on the other hand are simply refusing to pay the whole rental amount, including their utilities. This can really hurt property owners, some of whom still have to pay the utility fees to municipalities, leaving them significantly out of pocket. The best way forward is to play nicely, and do what’s best for your longer-term business relationships,” Palmer concludes.
About Paragon Lending Solutions
Paragon Lending Solutions is an independent lender, supported by one of the big four local banks. It helps established entrepreneurs grow their assets by structuring and accessing the right financing. Clients often lack the understanding, experience and knowledge of funding structures and product options that are available for the best, quickest and most effective path to growth. Paragon uses its diverse portfolio of lending products, extensive network of funding partners, and own balance sheet to address its clients’ need for property or bridge financing and working capital. Founded in 2009, it has financed deals in excess of R2 billion for a diverse portfolio of clients with varied financial requirements.
Some of South Africa’s largest landlords have taken a pounding over the last two months with even our largest retailers, like Massmart, seeking rental relief. While this serves as a cautionary tale, lending specialist, Paragon Lending Solutions, says smaller property owners and tenants can take action now to ride out the bumpy months ahead.
“As the reality of job losses begins to take its toll, many tenants will face the reality of not being able to pay their rent. Landlords, meanwhile, will be looking hard at their cash flow projections and wondering how they will meet repayments to banks and other lenders. Based on what we are seeing in the markets now, we have some advice for both property owners and their tenants,” says Gary Palmer, CEO of Paragon Lending Solutions.
Landlords, think long-term