ONE of a landlord’s biggest nightmares is when their tenant stops paying rent.
Most property investors have a mortgage on their investment property, so relying on this money arriving in their bank account each month is vital to their cash flow.
But experts say unfortunately landlords can be left in the lurch when the tenant suddenly hits the financial skids, whether it be through losing their job, becoming sick or simply living beyond their means.
This is when the payments stop.
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Landlord insurer Terri Scheer’s executive director, Carolyn Parella, said while the number of rental loss claims hadn’t increased in recent years, the amount being claimed had.
“Over the past twelve months we’ve seen average loss of rent claims resulting from evictions increase by around $400 over the previous year,” she said.
“Loss of rent claims following evictions averaged over $4100 in 2018 compared with around $3700 in 2017.
“The amount specifically relates to where a tenant has been evicted by court order and doesn’t include any other costs such as damages.”
Metropole Property Strategists director Michael Yardney said 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,” he said.
“Before you take on a tenant, check their past rental history using national rental databases and make sure you have a good line of communication with your tenant using a good property manager.”
Mr Yardney said if the worst did happen and tenants stopped paying rent, your managing agent – if you had one – should take immediate action.
It starts by sending them breach notices outlining that they have failed to pay their rent on time.
“If the tenant doesn’t pay you have to give them some time to do it, but if they are in arrears for 15 days you can sent them a notice to vacate,” Mr Yardney said.
“If they still haven’t paid you then you can take the matter to your local state-based tribunal.
“The landlord then has the right to take the possession of the property usually within three business days.”
However, this was the absolute last resort, he said.
Instead, he said, tenants should be given 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 YOUR TENANT STOPS PAYING
1. Get your managing agent to talk them.
2. Send a breach notice.
3. If they still fail to pay, take them to the relevant residential tribunal.
4. If they still don’t pay, you can have them evicted.
Originally published as A landlord’s worst nightmare