Hi guys,
I recently decided to tenant my investment property myself.
I found a tenant who is willing to pay 12 months rent in advance.
However, on closer inspection of the Residential Tenancies Act 1997 it says that if the weekly rent is <$350 you can only take 1 months rent in advance.
Does this mean I cant take 12 months in advance even if we are both happy to do this?
What if the place is my sisters principle place of residence and she is now deciding to rent it out. As she is overseas I will be leasing it out for her.
Much appreciate your help
http://www.luxeproperty.com.au/docs/rentingcomplete.pdf
Page 8 of this document on the bottom right hand under Rent in Advance says
"If you pay rent weekly, your landlord cannot ask for more than 14 days’ rent at the beginning of a tenancy. In any othercase, provided the rent is $350 a week or less, the landlord cannot ask for more than one month’s rent in advance."
It says the landlord must not "require" does that mean if the tenant is willing to do so it doesnt matter?
s.41A landlord must not require a tenant to pay rent more that 2 weeks in advance if rent is payable each week $299.00
(2.5 penalty units)Says its a $299 fine, does that mean I will have to repay the whole amount?
Say I receive it then the tenant does something wrong does that mean I have to pay back the whole rent and get fined $299 or do I just pay the fine?
Hi propertyboy
It might be best to call whoever regulates tenancies in your state. You could call a PM and ask also.
If they can't be "bothered" to may monthly rental repayments, get them to set up a direct debit and be done with it.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Paperboy, there are several issues at play here and alot is in the reading.
- In NSW the rental laws are changing on 31/1/11 which will bring the rental laws in line with what you are stating above (which state are you in?).
- The mere fact that the landlord cannot ask for more than 2 weeks rent in advance does not mean that the tenant can not offer to pay rent in any other manner which is acceptable to the landlord ie the tenant can offer to pay monthly or even 5 years in advance if it is going to secure them a discount but as landlord you cannot legally ask to be paid monthly in advance. I have previously accepted a year's rent in advance as the tenants had recently sold their house and would prefer to pay up front & secure a discount (works out well if you park it all in an offset account and transfer it to the IP when payments are due).
- If you need further clarification, you could contact the tenant's union or fair trading office in your state.
- A penalty unit is a $ amount which is adjusted annually. It is a bureaucratic way of being able to adjust costs (eg via cpi or lucky dip) but keeping the integrity of the system in place. If a penalty unit is worth $110, then the fine would be $275, next year it might be $100 and the fine $250 etc. Penalty units are not related to rental values.
Of course the thing you want to be careful of is, why are they prepared to do this (ie pay a year in advance)? If it is simply because there is so much demand they feel they've no choice, then all cool. On the other hand, you could say that if someone had a year's rent in advance, they are probably in a position to consider buying their own place instead? Just double check they're not into dodgy things such as using residential properties as drug labs or something
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I live in Victoria.
My prospective tenant is a retiree who recently defaulted on his mortgage. The property sold for $1m and after the bank takes their cut and all fees are paid he will be left with $200,000 in his pocket.He wants to pay the whole rental upfront as this will let him know how much to budget.Essentially, he will have this $250,000 and his pension.From a credit perspective, unless he gives me the 12montsh upfront I would not lease it to him. He seems like he will be a good tenant, but the fact that he has defaulted on a mortgage and has financial problems is a big no no. However, as he is willing to pay upfront it mitigates this whole credit risk and I am happy to give it to him. I think he understands this himself and this is why he suggested it.
Re why wouldn’t he buy his own house? 1) I am guessing he would have problems getting finance due to the fact that he has defaulted. 2) 1 years rent upfront won’t even be .01% of the deposit for a home in the area he is looking to rent in. 3) he is in his 70’s and probably prefers to rent.Should I go forward and lease it to him if he pays the rent upfront and is willing to do so?
It essentially gets rid of the whole credit risk in a sense which was my only concern with this guy.However, I do not want to lease it to him and then 5 months into the lease VCAT demands I pay the whole lot back to him.JacM wrote:On the other hand, you could say that if someone had a year's rent in advance, they are probably in a position to consider buying their own place instead? Just double check they're not into dodgy things such as using residential properties as drug labs or somethingI initially thought of this. Once he pays the rent upfront the risk of him not paying rent is pretty much mitigated. However, he could trash the place and do illegal activities. I went to the cops and asked If I could do a criminal check but they said you normally don’t do that for leases and that he would have to agree. So in effect, whetter he pays 12 months upfront or not the risk of illegal activates exists. In fact, it exists for all tenants and agents don’t really check for this. I have verified from his solicitor that he has sold his property so there is some reasoning for the upfront cash he has available. If he didn’t have proof he just sold his house it would be suss that he is willing to pay cash upfront I guess. But then, even so, this risk still exists for monthly payments and any tenant an agent finds.
Take the money – it mitigates the risk. Older tenants don't like change so they won't be moving out too quickly, a year up front is one massive bond. Park the money in the offset account. You may need to put a special condition into the lease to show you are bonafide – if the lease is terminated for XYZ reasons then the balance of the money paid to date (less reletting fees, water usage etc) will be reimbursed to the tenant, just so they know you won't break the lease/sell the property & run off with the cash.
What is going to happen after 12 months? will he pay weekly/monthly?
Is he getting a discount for paying up front?
Will you still be collecting water usage?
Still take out your landlord insurance (see if you can negotiate a better deal with the broker as non-payment of rent for first 12 months is a non-issue).
As for his reasonings – over 70 with bad credit probably can't get his hands on a loan, esp no way of financing payback, few people of his genre would prefer to rent if they could own. Upfront payment reduces his bank account (not like gifting money to someone) so he can maximise his pension entitlements – possibly.
I agree with Scott no Mates, And i'll also add that this bloke more than likely sees 12 months in advance as a form of Savings. ie, his rent is paid, any other monies he can do what he wants with. Thats probably why he defaulted on a mortgage by not prioritising his savings.
propertyboy wrote:From a credit perspective, unless he gives me the 12montsh upfront I would not lease it to him.If you proceed it looks like it might be a requirement of the tenant and may not comply with vic regulations.
Andrew
itsandrew
Go as far as you can see and you will see further.
the regs only state the owner can’t require an upfront payment, nothing about tenant voluntarily paying it.
I would think seen as he has just lost his house he is more than likely shaking in his boots especially at the age of 70, He is more than likely wanting to pay 12 months upfront so that he is secure and he knows he is ok for 12 months, and maybe he owes other money somewhere else and its possible it will all be taken off him, but seen as he will pay you 12 months, they can't take this and once again he feels safe and secure
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