NSW Agent mistake /duty to disclose in tenant application

Discussion in 'Property Management' started by Denise, 4th May, 2020.

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  1. Denise

    Denise Member

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    Hi Everyone! I do apologise for being new and asking for help - I've been a long time follower but first time posting!
    I have a situation at the moment where tenants can't afford to pay their rent due to being stood-down however something isn't right and I wanted to check with you on your thoughts/my rights as a landlord.
    I rented an investment property out just under a year ago and at the time the market was starting to slow so I did reduce the rent significantly after it was vacant for 4 weeks (I reduced it by 30% compared to what the previous tenant was paying) as the application seemed pretty good (a young couple with the wife earning a six figure salary and the husband in some sort of trade though agent was very blasé about his details). The rent was only going to be about 30% of the wife's net income alone so I approved it on that basis.
    With COVID19 the tenant has reached out to my agent asking for another 30% off their current rent (waived and not deferred), they wrote me a letter explaining that the wife is a stay at home mum and the husband who only earns just over half of what she was earning...has been stood down from work... meaning the current rent is almost 60% of his net income before he got stood down.
    When I started thinking back on things I started getting a bit suspicious with the timing of things such as:
    - I remember seeing a cot in one of the periodic condition reports
    - The agent was very very blasé when I asked her what their reason for moving was (she said they were down-sizing from a 2 bedder to a 1 bedder)
    - The agent was also very blasé when I asked about what the partner did for work when she kept telling me about the wife and not the husband.

    After a bit of digging I found the tenant's social media pages and noticed that her baby was born 4 months before they signed the lease (meaning she was most likely already on mat leave at the time of application)... I have looked up the area and properties available for rent, although the market has dropped a bit but the rent they are paying right now is still about 10% below market rate for the same type of property, the area my property is in is also pretty exclusive so there's not a lot of "stock" on the rental market. Things that have rented out recently for about the same price is smaller and older.

    So here's my questions:
    - Is the agent at fault for not disclosing their financial situation in full at the time of application to me? (I don't know if it's the agent who made a mistake or the tenant that falsified documents)...But had I known that my rent was going to be 60% of their net income I most likely wouldn't of approved their application due to the risk involved... I am trying to work out if it was my responsibility to probe the agent more or should the agent have disclosed or done more checks to make sure the tenant can afford the rent?
    - Another property's agent has a rule where rent must be 30% or less than a tenant's net income - is this a common thing or was it just with this agent?

    With the tenant not claiming they won't be able to afford the current rent I am trying to work out if they stop paying rent if I can lodge a complaint about the agent or use this in my case if it gets to point where I need to take the tenant to NCAT/Fair Trading if negotiations on rent reduction doesn't work out (I don't plan to waive the rent but offer a deferral only).
     
  2. thatbum

    thatbum Well-Known Member

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    1. It kinda sounds like you've jumped to a bunch of conclusions based on some social media stalking.

    2. Not heard of it as a thing.

    I'll cut to the chase - you pretty much have nil chance of pinning anything on the agent, and its weird that you have an issue now and not at the time. All the information was potentially available to you then if you had an issue with it at the time.

    For next time, either direct your agent accordingly, or just accept that you can't control everything that happens in your tenancy.
     
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  3. Denise

    Denise Member

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    Thanks for your prompt reply. The agent is one that I trust and so at the time I was happy to take their lead assuming it was their responsibility to double check applications especially when they kept telling me about the wife's income which based on that figure it was sufficient to cover for the rent and the agent would've raised any alarm bells if in the application it showed that the tenant may struggle to pay rent (to have 60% of your net income go to rent is on the high risk side especially when it's a single person income not dual). It was only disclosed to me now that the tenant was a single income and earning much lower than the figure quoted to me in the application when they wrote me a letter asking for a rent reduction.

    Regarding your comment about me jumping to a bunch of conclusions based on social media, well, it's very common that someone takes 12 months unpaid mat leave and unless a company gives you additional paid mat leave (not many do after the initial 12 weeks subsidised by the government) at 4 to 5 months after the baby was morn it is very likely she was not back to work yet and therefore unlikely to have had the income that was presented to me at the time of application.

    Right now as the situation stands either the agent had known about their income situation and didn't disclose this information to me (so I would approve their application) or the tenant had lied about their income situation.. yes there can be a third and that is the wife was back to work right after the baby was morn and decided to go on mat leave again... but how often does that really happy within the first 12 months of being a first time mum?
     
  4. thatbum

    thatbum Well-Known Member

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    Even taking your assumptions at their highest, I can't see how you could claim anything financially from your agent.
     
  5. Denise

    Denise Member

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    Thank you for your reply. I think you're jumping to conclusion that I'm trying to claim monetary compensation from the agent. As a principle of matter I am trying to work out if an agent should be responsible for vetting and ensuring full details of the application is disclosed to me and wondering what other agents/property managers normally do.
    I have other properties managed with other agencies and for 2 other investments in the past the agent will flag applications where the applicant's income represents a higher risk of affordability in the long run. i.e. in one instance the rent would work out to be 40% of the applicant's net income and the agent did warn me if that was a risk I was prepared to take as she considered 30% or less being the "safe" ratio... in another case the applicant's income again didn't meet her 30% ratio however the agent had a chat with them about her concerns and they provided bank statements to show they had a solid amount of savings to cover the rent should their income not be able to cover it. I've also had another agent where the applicant was on carer's welfare for looking after his mum but was waiting for his inheritance after his mum had passed away and in that instance the property manager initially wanted to reject the application however in the end we received an upfront payment for 6 months rent from his mum's trust to ensure that his rent was covered from the time of the rent commencing to him receiving his inheritance.
    I know these examples may not mean much to you but my ultimate concern is I've hired a property manager to act on my best interest but based on what I have in front of my today I feel that there's either a possibility of the agent wanted to get a tenant in there quickly and didn't give me full disclosure of their income / financial status OR the tenant didn't disclose this to begin with.
    As I said I am not trying to gauge if I can get monetary compensation from the agent but more so if the tenant is not happy with my not waiving their rent due to hardship and takes this negotiation process to Fair Trading / NCAT (NSW rules now are if a tenants income has reduced by 25% or more and negotiations with the landlord lapse they can have it escalated to Fair Trading) if this is something I can bring up.
    My agent keeps saying to me that if I don't come to the table with negotiations or show some compassion if this ends up at NCAT the member is likely to favour to tenant more. What I'm trying to prepare for is that if it does end up at NCAT or Fair Trading is the fact that I as a landlord was not given the full disclosure (either by the tenant or the agent) of their financial circumstances BEFORE COVID-19 and as a result took on a much higher risk without being privy to it (I approved their application based on DUAL income, no kids and the wife with a six figure salary where rent was less than 30% of her net income alone).
    Had I known that the applicant at the time was using over 60% of a sole net income to pay for rent, based on my history with other properties it would've been unlikely for me to approve this application with no supporting documents or evidence that they can service the rental payments...
    As a result of taking on this high-risk tenant in this situation there is no dual income and in addition to that a young child they are raising of which I also wasn't privy to (agent said it was a couple moving in, not a couple and a child).
    Should this not be something a member would consider? i.e. the possibility that the tenant may have deliberately given misleading information to start with and as a result I took on more risk that I thought I had?
    Again, I know you're going to say all of this is assumptions but I am trying to work out if it's worth the effort of my to investigate this further - the best way to find out if it was the agent to lied or the tenant would be to ask to sight all the application documents that was submitted at the time.
    Out of curiosity, do people usually ask to sight all the documents or is this something that the agent is responsible for?
    All agents I've worked with usually summarise the applications and send them to me in an email to choose a tenant from without the actual paper work from the application. Once I approve an applicant they then proceed with system and reference checks... I've never been presented with the actual documents (application form, payslips, bank statements and references) for any investments in the past as I thought that's what I'm paying the agent to do...!
     
  6. thatbum

    thatbum Well-Known Member

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    NCAT or fair trading are not going to care what did or didn't happen between you and your agent during tenant/lessor mediation or litigation.

    Sorry to be blunt, but you should focus on the main issue, which appears to be a rent reduction request.
     
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  7. Denise

    Denise Member

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    Thanks but it appears that you assume it's just about what happened between my agent and I... disregarding the fact that the tenant rented something they can only just/not afford to begin with.

    Anyone who thinks that putting over 60% of their net income into rent is reasonable in my opinion isn't very wise...(I'm also talking about their choice to rent in one of Australia's top 10 most expensive suburbs instead of an area that's more affordable).

    As for the rent reduction part, per my initial post a decision was made already, deferred but not waived so I'm not loosing focus but trying to get clarity what is acceptable and not with regards to the agents responsibility and what may come out of it should the tenant take this further if they are not happy with not having rent waived.

    I posted here to get an idea of what normal practice is from other property investor's experience, expectations of an agent, especially during the rental application process - as yes I am thinking that after all of this it's probably time to move on with a different agent. If the initial application documents show that the wife was already on mat leave and not working it will show that the agent didn't practice their duty to disclose this to me and instead lied and told me what she would've been earning had she been back at work... either that or they were given the wrong information by the tenant... I have requested to sight these documents so that I can get some clarity on how/what went wrong in the beginning as that will help me decide if I stay on or move away from this agent.
     
  8. Antoni0

    Antoni0 Well-Known Member

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    You have every right to ask for records, they're managing the house on your behalf not the other way around. They usually try to pull off the "privacy act law" when you ask for personal details and you can counteract by saying you'll sign a written letter that you'll abide by the privacy laws, but I do believe any recorded files of your investment home belong to you in anycase and if there's something suspect they'll mysteriously get lost.

    You can tell I've been down this track myself a few times, I had a PM tell me that a School teacher with 2 kids was moving into my rental, when it ended up being 2 unemployed bums that done work for the dole as teacher aids a few days a week. They were one of the worst tenants I had ever seen, parties all through the week, smashed windows, left the carpets with weeks of flea infestations and not even sure how they lived in there with kids.
     
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  9. thatbum

    thatbum Well-Known Member

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    My point is that if you cared so much about this, then you could have insisted on that information from your agent.

    The solution is to do that next time. Your agent has to comply because they are your agent at law.

    I just see it as simple as that.
     
    Perp likes this.
  10. balwoges

    balwoges Well-Known Member

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    Always ask to see the application for tenancy form before accepting any tenant and ask your PM by email if he has checked it. Make sure he answers the email.
     
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  11. jrc

    jrc Well-Known Member

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    In NSW you could have for example a private school teacher 14 weeks paid maternity leave by school, 18 weeks by government, some long service leave.
    Dont stress about this occasion, ask more questions next time if you want to.
     
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  12. Denise

    Denise Member

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    Thank you, this is very helpful!
     
    Antoni0 likes this.

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