Derrick Maguire is CEO of Luxfair Real Estate – Franchising all over Malta and the World
Buying a second property, or in technical terms an Investment Property, is a huge financial outlay for the vast majority of people. Over the years it has become chic to invest in bricks and mortar rather than the sometimes volatile stocks and shares options. Why then, when an Investor invests a six figure sum, maybe even their life time savings, do they accept a tenant with only cursory checks to rent their property? Why do they risk letting it themselves without the expert advice of a Lettings Agent?
Having lived and worked in many countries, who scrutinise tenants in every way – it has shocked me that the level of due diligence on a tenant in Malta is so minimal. It is as basic as – can I see your passport or Malta ID please?
Let me put it another way – what risks are involved in renting out your property to a tenant? Non- payment of rent, damage to the property, theft from the property, over-crowding, sub-letting….the list goes on. Surely as an investor you would want to at least mitigate these risks? Afterall you have invested a lot of money in this property and you are now willing to let ‘’strangers’’ live in it, would you let ‘’strangers’’ drive your brand new car with only a sight of their passport….i doubt it!
So how do we mitigate these risks? How do we carry out at least some legitimate checks on the tenant(s)? How do we protect our asset?
Here are my thoughts and proposals:
- ID must be checked and verified face to face. Never accept proof of ID without meeting the tenant(s).
- References from previous Landlord(s) should be insisted on and followed up to check their veracity. I get told that the vast majority of tenants are foreigners and how do we check these references? Well Malta is not alone in having foreigners renting, yet other countries manage to check Landlord references from abroad.
- Bank references should be sought as a belt and braces approach. I have had to get these to open a bank account in Malta, why should a tenant not have to get them to rent from you the Landlord. Plus they can then use the bank reference to open their bank account – a double use of one document.
- Credit checks are a must on anyone going into a financial transaction. It is only logical that you do these, but again, no they are not done. The joy of being in the EU is you can do checks on EU citizens who make up most of the rental population in Malta. Yes, third world countries provide a great challenge and have to be dealt with in a different manner. There is a cost to the check(s) but it is minimal compared to loss of rent you could sustain if the tenant defaults.
- In many countries you can check on any court judgments against a person – this is usually in the credit check.
- References from their new employer or existing one if they are moved here from another country. Again a phone call to said employer can verify the reference. Sensible agents will google the company to check the telephone number is correct and that the HR department person confirming the appointment does actually work there.
- Inventories are now being done in Malta, but again in a half-baked way. The only inventory that holds any weight, legally, is a video one. At checkout then you can compare ‘’apples with apples’’ and see exactly the condition of the property or item in the inventory. Having moved from London to Malta, the landlady who I rented from in London had a video inventory carried out before I moved in, then on check out the inventory guy went from room to room with me showing me where everything should be and its condition. The landlady tried to take money of my GBP 2000 deposit which I appealed against and won because of the inventory.
- This leads me to the last point and one that is the biggest worry to all tenants, not just in Malta, and myself when you read point 7 above – the return of the deposit. Why is the deposit held by the Landlord in Malta? Why is it not held by a neutral organisation? Deposit Protection Schemes are hugely important and have restored faith in many tenants, in the UK, when introduced. Remember the deposit is the Tenants money not the Landlords so why does the latter hold it? This fix alone would be more than welcomed by tenants in Malta as it is their biggest fear – not getting it back at the end of the lease.
There is lots to think about here for Agents, Landlords, Tenants and Government. However, would it not be great if you as the Landlord could sit at night, drinking an Aperol Spritz at Summer Nights in Marsaskala, in the beautiful Maltese sun knowing your Tenant has been checked in all ways possible/legal? Would it be great for you to have the ability to take out a Rental Guarantee Scheme on your Tenant meaning you are guaranteed your rent month on month?
Tenants would you be more relaxed, sitting having a Happy Hour drink in Hammets in Sliema, speaking to Petar the Manager, knowing your Deposit was protected? Knowing you have a professional video inventory to back up the fact the property was not clean when you moved in and the tiles in the bathroom were cracked?