What to do when a tenant’s rent is in arrears

Owning an investment property is a great way to earn extra income and secure a diverse financial future.

However, no matter what size, shape or condition, all investment properties have the same weakness – late rent. When rent payments fall behind, the situation can quickly put landlords out of pocket while causing them a great deal of stress.

When to deal with a tenant in arrears

At a minimum, if rent has gone in arrears for ten days then it’s prudent for a landlord to begin considering options for rectifying the situation before it escalates. You need to protect your investment and your income stream. This may lead to you seeking to terminate the rental agreement and evicting the tenants.

However, the law tends to side with tenants in rent arrears disputes. So before this stronger option is considered, it’s wise to consider a simpler solution. If you enjoy a good relationship with your tenants and the missed payment is out of character, most legal experts will advise settling the matter out of court.

This can be done by contacting the tenant and discussing the situation, perhaps leading to an arrangement where the rent arrears is paid back on mutually agreed terms. Your real estate agent or property manager should be able to assist you.

But if this simple solution cannot be produced, then it’s time to consider escalating. But be warned – it’s vitally important that you follow the due process.

Ways to make tenants pay

The bond for the rental property should be at least one month’s rent or up to $700 depending on the state your property is in, so that can be used as a buffer for the timeframe in which you take action against the tenant.

However, once a tenant starts to fall behind on rent, the chances of them paying it back in full are slim, especially if the amount begins to build up. If you leave the situation longer than thirty days, it may end up costing you a lot of money in legal fees – perhaps more than you stand to recoup.

Once you have decided to take action, your first reference should be the lease agreement, which will spell out an agreed procedure for eviction, usually if the rent is in arrears for more than 14 days.

Sending a breach notice

Serving the tenant with a non-payment termination notice is key to recouping your lost rental income and evicting the tenants. But the 14-day provision is only active from the first day the tenants receive the notice, which must be served to them properly.

If you get anything wrong with this, even the most minor detail, then a tribunal could reject your application to have the tenant evicted. So to give your case the best chance, make sure the notice includes the reason for the lease being terminated, the date the tenants will be required to vacate the property and the property’s address.

It’s also crucial that you include a statement saying if the rent is paid then the lease agreement will be upheld. The notice itself can be issued in person, by fax or mail. Keep copies of everything, take notes and make sure you follow the procedures spelt out in your rental agreement to the letter.

Get specialist help

If you have to go to a tribunal to evict your tenants and claim back any rent that’s in arrears, you can rest assured the case should be dealt with quickly. The process is cheap too – costing around $47, depending on the state you’re in.

However, it’s vitally important that you have followed due procedure every step of the way.

Lodge can help manage rent

To help ensure rent payments are made on time and a rent arrears situation can be avoided, an online rent collection specialist like Lodge can be invaluable.

Lodge’s simple to use online portal will help you manage your rental property with an automated rent tracker and reminder, so your tenant will never forget or miss a payment. This can save a lot of hassle and stress, and give you peace of mind that your side of the rental agreement is kept thoroughly in order.

To get started, look us up online at www.lodge.com.au.