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What happens if your tenant does not pay their rent?

By Emma Smith

So the big question – “what happens if your tenant doesn’t pay their rent?”

“Rental arrears can impact the performance of your investment property and if not managed correctly, the relationship between a tenant and a landlord can turn pear-shaped very quickly. Balancing the fine line between acknowledging the sometimes difficult circumstances of a tenant and securing a steady return on your investment property is a challenge that can rattle even the most hardcore property manager or landlord.

So, here is our take on what we believe is essential in a good arrears management process”(and obviously what we perform everyday):

A Daily Monitoring Routine
“Managing arrears effectively depends on strict daily routines and processes followed up with the right knowledge of legislation and documentation. Some tenants may have genuinely forgotten to pay rent if an automatic payment has not been set up – we are all human! That is why daily check ups are important. Without a proper rent monitoring system in place, missed payments can easily go unnoticed. The earlier a rental arrears situation is solved, the easier it becomes to get a tenant back on track with their payments.”

The Late Rent Notice / Letter
At Ray White Warrnambool “we have absolute ZERO tolerance approach when it comes to rental arrears. We contact late payers everyday they are late from the first day – all via phone calls, sms and emails, to ensure that these issues are solved quickly and efficiently. It the tenant has not brought the arrears up to date we will issue a”
 formal letter advising the tenant is in breach of their agreement and not rectified will be served a notice to vacate the property. Hopefully this prompts immediate resolution.

Pay Up or Pack Up
“Despite a detailed arrears follow-up process, proactive steps towards resolution are not always successful. In this instance, it’s time to back up our words with action. This is essentially the first step in the eviction process. The ‘e’ word is never ideal, but if the tenant can not or will not pay rent, it is time to get serious.”
 This means issuing a Notice to Vacate if the tenant has not taken action and becomes 14 days behind in rent. At ANY stage, it is important to document everything in writing and keep copies.

The Last Resort
If the tenant has still not paid their rent, despite a notice to vacate the property, the next step is applying to the VCAT (Victorian Civil & Administrative Tribunal) for a termination/possession order to remove the tenant from the property. “This should be the last resort if there are no other arrangements to collect overdue payments. Once an official court order is obtained the tenant can be forcefully removed from the premises” (please note you would need to obtain a warrant of possession from the local police station and have them accompany you to evict the tenant from your investment property – you cannot do this yourself).

“This is, of course, the last resort. We never forget that each eviction case greatly impacts the life of a human being. These people lose their homes and even though we are professionals that take these matters seriously, it is not always easy to follow through with the process. While we understand that these things are necessary, we always hope to solve the issue before it comes to this drastic measure.

Why we take this role seriously.
Daily monitoring is a vital step in successful property management. Staying on top of rent arrears means that the situation can be dealt with before it becomes a real problem.

Protocol is everything once this process begins because the slightest slip up could mean legal liability and the situation can quickly spiral out of control.

And finally, it is important to approach the tasks at hand with your best interests in mind. While we like to remain considerate and empathetic to different people in different circumstances, it is too easy to have tenants take advantage of the situation. As property managers, we see a tightly managed arrears process as a necessary precaution to look after our client’s assets. Once a tenant falls behind it can be extremely difficult to recover the funds – especially when not equipped with the right knowledge. It’s a tough job and a delicate situation to be in, so we approach it with a cautious balance of empathy and tenacity.”

Source:
Only, P. (2019). What Happens If My Tenant Doesn’t Pay Their Rent? – Property Only. [online] Property Only. Available at: https://propertyonly.com.au/landlord-tips/happens-tenant-doesnt-pay-rent/ [Accessed 25 Mar. 2019].

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