Hi Guys,
Basically I have had a Tenant who has come under 'financial stress' and has stopped paying rent. This was about 2 and a half months ago…
The agents have been not too bad and we have followed the correct steps to get possession of the property hopefully early next month (fingers crossed no damage).
The agent has said from a drive by it looks like the property has been abandoned as of yesterday and have issued a notice of abandonment or something along those lines which expires the day before the tribunal.
We do have insurance which we will be paid once the figures are finalised and hopefully the bond will cover the excess and cleaning of the property, but I was wondering if the tenant has any responsibility in this matter? Or can he just pack up, say thank you for my 3 months of free accommodation, and move on? I understand he will probably be blacklisted with the real estate agents but is that all? Does he not have any liability to pay back what he owes?
It has been an interesting learning curve to say the least and my $300 annual landlord insurance will have paid for itself over and over so I am thankful for that.
Cheers,
Nathan
Hi Nathan
I hope you guys are doing well up north.
It's a frustrating situation – I've experienced the same thing.
Long story short – tenant was in arrears about $3k or so.
Tenant vacated the property – we kept the bond and then went to the tribunal to recover the rest.
Tenant didn't attend the tribunal hearing. He was served with a couple of notices to pay up. He never did.
It got to the point where it just wasn't worth the time/effort and we gave up.
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]
Cost of doing business is how I look at this stuff.
If you've set up multiple layers of protection namely; active management, bond and insurance then what's left over is usually rather minor in the scheme of things.
If you have comprehensive insurance cover you may find the insurance company compensates you and then pursues the tenant for compensation. For the most part pursuing a tenant would be an exercise in futility. You may however get some value in stressing them out as some compensation for all the agro.
Hey Jamie,
We are going great at the moment thanks. Hope all is well with you guys and your new addition to the family!
Yeah it is a little frustrating at times, but I am glad I have insurance so I won't have to waste time and effort chasing an ex tenant who will probably never pay!
Cheers,
Nathan
Yeah I agree Freckle. My missus doesn't see it that way though. I have tried to explain to her that it would be the same as running a business, you are always going to get bad debts and people who choose not to pay for your service.
Definitely glad that I have multiple layers of protection now as we will only be slightly out of pocket by the end of it all.
Just doesn't sit well that he can pack up an move on with no liability at all.
And then to hear on the radio the other day, those of you that listen to hack on triple j, that Australia has one of the most lenient tenancy laws in the world and that they favour the landlord too much and should be changed. Really don't agree with that but anyway.
As indicated by the others already, insurance etc covers you mostly for such incidents. Your case is an example of why it is best to have an emergency fund available when you are in the property ownership business. Just in case a tenant defaults, or a roof needs repair, etc etc
Jacqui Middleton | Middleton Buyers Advocates
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Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Get a judgement against the tenant (via Fair Trading/Vcat) pass it on to the insurers to collect the debt.
Sorry which state do you live in? I don't know the full circumstances of the situation but taking 3 months to evict sounds very long time. In NSW an application for termination should be submitted to the Tribunal immediately when the tenant fell 15 days into arrears to protect your legal and financial interests. The process to eviction might take 7 weeks pending on how long you have to wait the be heard by the Tribunal.
I hate it when tenants believe they don't have to pay rent because they are claiming financial hardship. Financial hardship is not an excuse to void responsibility to pay rent rather's designed as an out for fixed term contract.
Fortunately you have insurance, which as a real estate agent recommend every property investor takes out.
Cheers
Lee
Edit
The only way to collect the money from the point of eviction is to get a court order. The problem is most of the time the cost of legal representation will outweigh the outstanding amount owed so it's better to just write it off as a cost doing business and move forward.
Put it through your land lord insurance. My insurance company covers loss or rent until such time the property is re-leased. Property must be under a fixed lease. They also use the bond towards the first 4 weeks loss of rent which can leave a hole in your pocket if there is a bit of damage. As long as the property is advertised once vacated, they cover up to a total of 14 weeks. So to make up for the 4 weeks of bond used, im never in a rush to get someone in and always go close to the mark of 14 weeks.
Yes, someone that owes you money is responsible and you can take legal action to get this money back. If you have an insurer they will probably take this action (in your name too!).
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Guys,
Thanks for all the advice and replies. Sorry hadn't got a chance to get back on here lately.
The tenant has finally moved on (probably after they shut the power on him), and am going through the process of getting the property back up to scratch.
Thankfully have already had tenants ready to move in for a couple of weeks now so they are due to move in on the 21st! Will be good to finally have rent coming in after neally 4 months!
Unfortunately the maximum claim for loss of rent with my insurance agency is $5k so I will be slightly out of pocket there but all just a part of property investing I think.
Is this the norm having a 5k cap on loss of rent claims? Does anyone have a policy that is uncapped or better quality then the one I currently have?
Cheers,
Geez, a $5k cap would barely touch the sides on some properties around my way which run at over $2k/wk.
Couldn't agree more Scott. Luckily this was my rental with the lowest amount of weekly rent otherwise it would have been much more painful.
What insurance company do you use and is your loss of rent uncapped?
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