It's one of the worst nightmares for landlords — a tenant who hasn't paid rent for weeks and won't vacate the property.
Unfortunately a good tenant can quickly turn into a bad tenant.
This can happen due to personal troubles, health issues, drugs, they lose their job or get divorced.
But the problem is, as a property investor you not only stand to lose out on your rental income, which you’re most likely relying on to help pay your mortgage, but you may not be able to access your property or find new tenants until your existing tenants leave.
And the end result is that you could be significantly out of pocket.
Well, it all starts before you take on a tenant.
Make sure your property manager checks their past rental history using a national rental databases and make sure your potential tenant doesn’t overextend themselves.
At Metropole Property Management we don’t like the rental to exceed 30% of the tenants’ combined income, otherwise they’re more likely to find themselves in mortgage stress.
I believe it’s important to have a good line of communication with your tenant by using a good property manager.
Hopefully they’ll have done regular inspections of your property and answered any tenant requests promptly.
This should make communication during challenging times a little easier.
Tenancy legislation is a State based law so it’s critical that you have a proficient property manager looking after your interests to stay within the laws when this type of unpleasant situation arises.
Your property manager should know the day your tenant is in arrears by checking their trust bank account.
Their first step should be to find out why your tenant isn’t paying rent, and to begin making polite enquiries and assist in minimising your loss.
The reason you haven’t received the rent could be something quite simple and easily fixed, such as:
- simple forgetfulness
- temporary cash flow problems
- a misunderstanding between joint tenants
Or it could be something more complicated and long-term, such as:
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- your tenant has lost their job
- your tenants are a couple and have split up
- your tenant is suffering from challenging personal issues (such as bereavement or work-related stress).
If a tenant does not pay their rent by the due date, they are considered to be ‘in arrears’.
In Victoria if tenants become 14 days or more in arrears, they can be issued with an official notice to vacate.
The number of days in rental arrears before these notices can be sent varies around Australia, so it is important to be familiar with your local tenancy laws.
But a landlord or property manager cannot evict a tenant, the proper procedures must be followed.
Firstly, the notice must be correctly worded and correctly delivered including, being delivered by registered post.
Then the matter must be brought before the relevant tenancy authority such as VCAT or the NSW Civil and Administrative Tribunal.
The tribunal may then issue a warrant of possession to evict the tenant.
However at Metropole Property Management we try and nip things in the bud by monitoring arrears daily, because if a tenant falls behind in their rent, the sooner you know about it, the sooner you can attempt to resolve the issue and mitigate any financial loss.
We call and email the tenants and then send a breach notice outlining that they have failed to pay their rent on time after they’ve been in arrears for 3 days.
Going to the tribunal is the last resort.
Often the matter can be resolved by giving the tenant the option to make part rental payments or more frequent payments such as weekly to get them through what is hopefully just a bad patch.
If the tenant must be evicted, you will most likely be able to retain part or all of the bond to make up for your loss.
And any additional loss should be covered by your Landlord’s insurance.