Rent Defaulters
Rent Defaulters

The Urban Landlords and Tenants Association of Kenya wants to have rent defaulters listed with Credit Reference Bureaus (CRBs). As such, when you go house hunting next time, you may find that your credit history plays a huge role. This will determine whether you sign the lease or your landlord will turn you down. The ULTAK is waiting for the consent by the Central Bank of Kenya to start the process. By so doing, landlords will be able to liaise with CRBs concerning their tenants’ monthly payments. If successful, people who have previously defaulted on rent payments will find it hard to rent in another location. This is because landlords will demand a CRB clearance before moving houses.

Rental Disputes Between Landlords and Rent Defaulters

Today, landlords resort to a number of crafty ways to deal with rent defaulters. These methods include locking up a tenant’s belongings to recover unpaid rent. Once the plan is implemented, it will become difficult for tenants to dodge their responsibilities. Consequently, landlords will have an easier time. Mr. Murigo, the ULTAK Sec-Gen points out that landlords usually have a hard time resolving rental disputes with their defaulting tenants. Even with the existence of rent restriction tribunals, the process is still a challenge. The threat of messing up someone’s credit score, he hopes, will serve to keep the tenants honest.

My association has come up with a formula whereby tenants will stop feeling like defaulting on rent is normal. We have approached credit reference bureaus to partner with them with an aim of listing all tenants who default on rent payment,” Mr. Murigo said.

Is It Really A Good Move?

Ms. Diana Kituku, a financial expert, terms the ULTAK proposal as a potentially good move. She says it could weed out chronic rent defaulters from the real estate industry. However, for the idea to come to fruition, a lot of factors need to be considered and discussed with relevant parties forehand. For example, she notes that people who have low credit ratings are sometimes just victims of circumstances. For this reason, it would be unfair to deny them housing without lending them a listening ear. Unpredictable events such as huge medical bills, a sudden retrenchment at work or a natural disaster can leave one languishing at the lower rungs of the credit score chart for a while. Therefore, landlords should have a system of overlooking such misfortunes.

Why Listing Rent Defaulters on CRBs May Be A Mistake

It would be a mistake, Ms. Kituku warns, for landlords to only consider a strong financial standing when renting their houses. “To me, a factor such as whether a tenant has a past criminal conviction is more important. I would also want to know whether the tenant in question will live in harmony with the neighbors, and if they are likely to keep the premises clean and in good condition,” she says.

Ms. Kituku further points out that not every Kenyan adult has a credit record. This is especially true for young professionals and students still in college. These are yet to take up loans that will build their credit history. Does it mean, she asks, that they will be denied housing? Ms. Kituku also questions whether it is fair to deny the right to housing to those blacklisted by CRBs. Data released last year by Transunion Credit Reference Bureau showed 500,000 Kenyans have been blacklisted and thus cannot access credit facilities.

Tenants Need To Be Protected As Well

The financial expert advises that should the ULTAK proposal go through, landlords should develop a system that will make it possible for their tenants to co-sign the lease agreement with a third party.

“Say a tenant is an 18-year-old student with no credit history. He or she should be able to have a parent or guardian co-sign the lease so as to put the landlord’s mind at ease. A tenant with a low credit rating can also co-sign the lease with a relative or a friend who will be liable should they fail to pay the rent on time,” Ms. Kituku proposes. “We may even see a scenario where the size of the security deposit requested by landlords becomes larger as tenants’ credit scores reduce,” she further says.

“Allowing landlords to indiscriminately check out potential tenants’ credit scores raises dicey privacy concerns, especially in a country like ours where data privacy and protection rules are lax,” Ms. Kituku points out. She says landlords should be allowed to request credit scores only if the potential tenants grant them permission in writing.