VIC Break Lease, how fussy can I be over new tenants (COVID)

Hi, my tenants are breaking the lease as they want a bigger place. There have been two inspections so far and the Property Manager has made a recommendation of a replacement tenant. I haven't seen the details yet and references haven't come in however he thinks they will be a good fit. My only concern is the main income earner gains income from hospitality industry which would likely be effected by future lockdowns. I consider that a bit of a risk during these COVID times and would prefer someone with an office job who could work from home, or a tradesperson. People less likely to be affected by a shutdown.

As it is a break lease situation am I able to knock them back hoping I get some other applicants at the next viewing. Not sure how fussy I am able to be in break lease situation while still expecting the rent to be paid. Am I being over the top to worry? Just weary of these stories of people not being able to pay the rent and you not being able to evict them. My current tenants have secure covid proof (as much as possible) jobs

 

I would check the prospective Tenants current rental ledger for where they have been staying as well as their income since Covid started which has been over a year now and see how that has been going. If they have managed to pay rent on time and maintain and income whether employed or from Centrelink, then it's unlikely for that to change as time goes on our Covid situation gets better not worse as vaccination rates increase daily etc.

 

Yes I have asked the Property Manager to get that information from their previous place

 

You cannot knock back a reasonable tenant just because you feel his job is precarious.

Well, you can - but can’t expect your previous tenant to continue to pay rent while you pick and choose. You may never find the “perfect” tenant!

It appears you don’t trust your property manager’s recommendation. Maybe a different PM?

 

It's not that I don't trust them, would just prefer someone who has a secure job, and I am unsure in these current times we can count hospitality workers as that, unfortunately. Just a bit worried by the scare stories you see and was wondering if other people would think the same or if I am being unreasonable.

 

No employee has a secure job - they could go into work one day and find the employer has no job for them. Self-employed and business owners are the only people with secure jobs, in the sense they get up and choose to go to work and create and make work. Centrelink, surprisingly, is actually one of the securest forms of 'income', as people don't get fired from it

 

How do you define “secure”?

Even large corporations go into liquidation.

Consider airline pilots - pre-Covid you would have considered then ideal tenants. Now?

And just because someone loses their job does not automatically mean they can’t pay their rent.

And since you asked - yes, you are being unreasonable.

 

Yes that's certainly true, they would go in the same basket as the hospitality worker and it is true anyone can lose their job tomorrow. It's just in this new world, there appears to be a group of workers the government can just stand down without notice that I think are higher risk.

 

Not all of those workers need thier regular paycheck to make rent however.

It seems every second school teacher and IT professional I've ever met is only on a tempory contract of sorts too, so by extension should they be considered unsuitable?

I was stood down from paid work in early 2020 when I took on a new lease. The first question asked was how do I intend to pay the rent. I offered to play the 12 month lease upfront but the PM was happy if I was simply able to prove that I could... I got the property and didnt miss a payment.

Point being is that you are worrying about the wrong things.

 

How much is the rent on your IP. I have Centrelink recipients paying $360pw. If your rent is near that figure or less, and they have a good rental history, I don't think you've got cause to worry.

 

Yes you are correct, I have never been through a lease break before so I am unsure if I am able to keep viewing going for 3 or 4 weeks to get the ideal (to me) tenant like I would be if the house is not occupied

 

But what if you don’t find your “ideal” tenant in 3-4 weeks?
How long do you expect the tenant to keep paying?

Your other option is to release the departing tenant after the first suitable applicant is refused by you. Then you can take your time finding the tenant you want.

 

Are the applicants otherwise exceptional? Have they had any issues paying rent over previous lockdowns?

 

Check your insurance first. If you release the tenant who is on a fixed term lease, then you will likely not be able to claim loss of rent up until you find a new tenant.

You can of course decline applicants, but if you get to declining 'reasonable' applicants (and reasonable is different for everyone), then the tenant can say that you failed to minimise their loss and are no longer responsible for paying further rent. So if it goes to VCAT / you're trying to claim their bond for unpaid rent / loss of rent, they bring that up and the member then gets to decide.

Once the tenant physically vacates and returns the keys, VCAT here rarely grants more than 28 days loss of rent (this isn't written anywhere, but it's from experience in these exact scenarios). This is why you have insurance.

The tenant owes you rent while living there, they owe loss of rent due to breach of fixed term contract after they return keys / vacate while still in a fixed term lease.

Good luck!

 

Break lease is not always bad
They pay you a few weeks and you may end up with better tenants

You don’t have to respond to the first application straight away
Get your Pm to hold as many opens as possible at least 1-2 a week and private ones if Covid Restricted and hope for more applications
If no other better application comes along then you can worry about this and weigh up the risks of whether they can maintain rent payments (assuming they’ve not been approved by another place which is a risk you take by not accepting them now)