Break lease... no new tenant... court threatened

One of Brisbane IPs is a decent house on a developable block, it had a 12 month lease expiring in January.

About 4-6 weeks, the (good) tenant broke lease, and has vacated the property. To date, she is still paying rent. There are no vacate issues except some yard maintenance.

We have had loads of opens, and loads of inspections, but no applications at the current price.

The biggest drawback is a major construction site across the street, and DA approval (with a big for sale sign announcing the unit development) on the block next door. Thus... no one will have a bar of it.

The PM rang yesterday and said there are no takers, and given the surrounding developments, it's now way overpriced. She said that the tenant is paying rent still, but given there is 6 months to go is muttering about going to court to break her lease.

She does have a case - the developments are new since she moved in, and are definitely impacting its rentability.

So, where do she and I stand?

Do I drop rent now to get it tenanted and wear a loss until the construction is all finished? (This might be a year or two, once the dust settles I think the house will be desirable again)?

Do I offer a rent drop now and her to cover the shortfall - this might keep her happier.... ?

Do I just hold out as long as we can... it's a contract after all, and wait to see what happens in court?

(Do I sell?? I've had some quiet inspections, but really I don't need to. I'm also trying to buy the DA approved house next door, but this may just double my troubles!).

I'm not interested in developing it until probably the next cycle.

 

You have to make reasonable attempts to mitigate the loss. So if that means dropping the rent and her covering the differential then so be it.

How much lower does it need to be to get rented?

 

You have to mitigate your losses.

 

Pretty much this. Especially given the construction disruptions, you need to price it accordingly.

The good news is that you still should be able to claim the difference in rent from the outgoing tenants as long as you do take reasonable steps.

 

You may remember previously my dissatisfaction with this particularly PM, so I've given the property to a new PM who are already far more proactive in this issue. It will now be dual-listed, in essence giving the old PM 30 days notice.

Interestingly, the new PM says its a great property, is about $50 a week under what it should be (albeit its a quiet time of year), but that we should relist afresh, drop the rent with old tenant to cover shortfall, and that the time she will take to get it into court will work in our favour in the interim.

She believes we are then making all reasonable attempts at a new tenant including - dual listing/new listing, rent drop and 7 day access for open for inspections. She thinks the construction is irrelevant, and that prospective tenants wouldn't even notice it

I agree with pretty much everything she told me without prompting, so she got the job. At 7.5% management, which I think is pretty good.