Hi all, [exhappy]
I’m about to settle on my first IP – The property is currently tenanted however the tenant knows the landlord – therefore there is a ‘verbal friendship’ agreement in place between the two.
The real estate agent said that the tenant would like to stay on – and I asked the agent if I can get the tenant to at least sign a lease – this way I can get the agent to look after the property for me as well as any issues. The agent can only do this after settlement though?
So…. I was wondering, how do I protect myself after settlement if the tenant decides not to pay rent? Is there anything that I can do now or organise with the landlord/seller before I settle?
All the help I can get on this would be really greatful, and thanks in advance.
Congratulations! I hope you have a great investment experience.
If the contract of sale is unconditional there is not much you can do to force the tenant to sign a lease until after settlement.
Whether the tenant is on a periodical lease or a fixed term lease is irrelevant – they are still bound by the Tenancy Act. Depending on which State your property is in the rules can be slightly different, but not much.
If the tenants have been there a long time and have been on a periodical (month to month) lease already, then you probably don’t have a lot to worry about. This is quite common actually – we have 2 of these now and the tenants are great. The advantage is you can re-assess the rent more often, and maybe increase it. The disadvantage is they can leave at a month’s notice.
The advantage of a fixed term lease is the tenants are locked in for a set term, the disadvantage is you cannot re-assess the rent as often. In another property we have a tenant on a 2 year lease, but the rent has gone up in the area and we can’t raise ours. It’s a trade off to a degree.
From experience though, it really doesn’t matter whether the tenants are on a long or short lease – if they want to skip out and not pay there isn’t a lot you can do to stop them.
The Tenancy Tribunal will rule in your favour, but it is hard to get the money from the tenant after they have gone. The only satisfaction is they will be blacklisted and have trouble renting again.
You will probably have to make a claim through your Landlord’s Insurance to recover the money. I have had to do this once – I got the money back, but I was out of pocket a few months until it was all settled.
You absolutely must get landlords’ insurance to protect yourself as soon as possible. That also applies to building, contents and public liability insurance on the property. Even though you haven’t settled on it, you can still be liable, so do it now. You should be able to get an all-in-one policy from NRMA, AAMI to name two. Do a google search to find others.
My suggestion is to leave things as they are with the tenant until after settlement, then discuss the options with the agent. If the tenant has a good record of payment and taking care of the property, I would be letting them stay on a periodical lease to keep them happy and more importantly – staying.Cheers,
Marc.
[email protected]Thank you very much for the information.
I better start sourcing insurance now.
I don’t think there is any ‘lease agreement’ in place as the tenants know the landlord therefore just paying month by month directly to the landlord.
Thank you again and looking forward to learning more things.
[happy3]
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