What happens if your tenant stops paying rent?

When it comes to managing bad tenants, prevention is worth an ounce of cure.

As a property investor, the last thing you want is a bad tenant. And 99 out of 100 tenants are great. But what are your rights when the rent stops and the tenant burrows in like a tick?

We’ve all heard the stories.

Good tenant going in. Good job, pays rent on time. Mows the lawn.

A few parties every now and then. Nothing serious. The neighbours are happy.

But then –

they lose their job. The parties happen a lot more often. There are cars coming and going at all hours.

The neighbours complain.

The rubbish piles up out the front.

The rent stops coming in.

And this isn’t even the worst case scenario. Bad tenants can be really bad; and can result in you losing access to your own property, or your property being significantly damaged.

And costing you significant time and money.

But in most cases, these problems should never happen. Most tenants will do the right thing because they don’t want to end up homeless.

If you have a property manager they should be all over it from the start.

If you’re going it alone it pays to know your rights.

You or your property manager should be across all the dos and don’ts of vetting tenants, from checking out their rental history and references to making sure they can actually pay the rent.

Most agencies have policies built into the rental application process, such as the rent being not more than 30% of a tenant’s income. This is good yard stick for you, too.

But should your tenant fall behind, they are considered to be in arrears if they are overdue by a certain number of days. Know the law in your state – in some states it is three days.

So what happens when a tenant is in arrears?

This is when good communication skills come to the fore.

It could simply be that the tenant didn’t realise what day it was, and the payment date slipped passed.

A polite and friendly email or text message to remind them should be enough.

Things could be more serious – they may have lost their job, become ill, or had an accident. Relationships can fail, sometimes there’s a death in the family. These things can seriously affect a tenant’s ability to pay on time.

If you’re managing your own property, you will have a relationship with your tenant, and they should be able to reach out to you if things have gone pear shaped.

Otherwise your property manager should have an established line of communication with your tenant – this is what you’re paying them for, after all. Perhaps a payment plan can be put into place. Something that works for both of you.

After all, you’re relying on this income to pay your own mortgage and protect your investment.

But if you don’t get a satisfactory outcome, you should understand when and if a Notice to Vacate needs to be issued. It’s kind of a warning that the tenant will be evicted. In Victoria, this can be done once the tenant is in arrears by 14 days.

A Notice to Vacate isn’t just a “Get Out” message wedged under the door, nor is it a text message sent at 3 am. In fact, a landlord or property manager can’t actually evict a tenant.

The Notice to Vacate can be issued by yourself or the agency, but it has to be delivered by Registered Post. Then the matter is filed before the relevant tenancy body.

In NSW it’s the NSW Civil and Administrative Tribunal. In Victoria it’s VCAT. The tribunal will make a decision based upon evidence provided by both parties and they may enforce a possession warrant.

You should still have bond money at this point, lodged with the relevant authority. In NSW this is the Dept of Fair Trading and it is a legal requirement of all rentals in NSW. You can’t just keep it in a sock under your mattress.

And make sure your insurance is up to date.

Hopefully it never gets to this point and you maintain an awesome working relationship with your tenant for the long term.

So your investment does what it’s meant to do.


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