Rent increase or hold

Discussion in 'Property Management' started by L3ha7, 3rd Aug, 2017.

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Would you ask the difficult tenants to vacat the property?

  1. Yes

    10 vote(s)
    100.0%
  2. No

    0 vote(s)
    0.0%
  1. L3ha7

    L3ha7 Well-Known Member

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    As we all know market has gone up in Syd and Melb and other places. I wanted to get opinion from all of the experienced people on this matter:-

    4/2/2 nice house built in 2012 in Wyndham Vale, vic. Bought the property with tenants more than a year ago. (Rent 360 pw but no air con) Property is managed by a PM. We had initial teething issues with our tenants.

    The tenant is paying rent weekly which means he is not foolowing the rule where tenant pays monthly rent in advance.

    Current lease is expiring end of Sep and we are not sure if we should increase the rent or not.

    Tenant has some back issues hense he doesnt work and when we decided to increase the rent 6 months ago-it didn't go very well and he played his health card. Our PM suggested to sign 6 months lease so that next time if he threats to involve some rental union etc we will have this lease as an evidance.

    The rental market has been improved in the area and property is in the better part of the suburb.

    We are tossing if tenant won't vacat the property and involve other parties, that be an extra expense and summer is comming as well. We don't want to leave the property empty either.

    I apologies for the long Q/story.
     
  2. thatbum

    thatbum Well-Known Member

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    What do you mean by this?
     
  3. EN710

    EN710 Well-Known Member

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    Is this correct for VIC? In NSW the max landlord can require is 2 weeks in advance.

    Was the increase reasonable? If it's expiring simply give him notice to vacate?
     
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  4. mikey7

    mikey7 Well-Known Member

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    Raise it to what you think is fair and based on current market. Surely a 'rental union' can't dictate a certain rate that limits the landlord's return on investment?
     
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  5. Tom Rivera

    Tom Rivera Property Manager Business Member

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    @EN710 Melbournites have different rules about rent payments in advance being enforceable. I only recently went through this with someone but I can't quite remember how it works down there.

    @mikey7 The rules surrounding rent increases are a little hazy and the southern states are particularly sympathetic to tenants in this regard.
    _______________________________________________________________________

    More than likely it will be as simple as either applying an increase to market rent, or asking the tenant to leave. Worst case scenario this tenant really knows how to play the game, in which case you will need to make very carefully considered decision in consultation with your Property Manager.

    At step one, the rent increase absolutely must be justifiable with clear evidence that you are reverting partially or fully to market value. If it is dramatically below market rent and you attempt to increase by a significant margin (e.g. $40wk) then the tenant still has a very good chance of having the increase thrown out in tribunal. The word "reasonable" is up to the consideration of whichever member you get on the day.

    The other frustrating part is that if you attempt to provide the tenant with notice to vacate, they may argue that you're being retaliatory and they have no where to go. This is usually about the time the rent stops getting paid as well.

    It is my educated opinion that these experiences are UNCOMMON, as we only really hear the bad stories. There is every chance that the tenant will leave when asked, and you will have the opportunity to re-let at a more appropriate price.
     
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  6. L3ha7

    L3ha7 Well-Known Member

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    I believe they involve some rental union to conduct some legal issues.
     
  7. L3ha7

    L3ha7 Well-Known Member

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    We were thinking $20 increase.
     
  8. L3ha7

    L3ha7 Well-Known Member

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    This is the concerning part
     
  9. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    Your PM should have a clear understanding of how this is going to pan out and advise you accordingly...
     
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  10. L3ha7

    L3ha7 Well-Known Member

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    The following email is from my pm (feb 2017):-I hope you’re well. I finally been able to get a hold of the tenant and he is currently suffering a medical condition. He has had surgery on his back and is not looking to be able to lift or move things for quite some time. He has advised he simply can’t move, and that he would attend VCAT to dispute the 120 day notice bringing his medical certificates to appeal for hardship.


    Now, there are two ways we could go about it.


    1. We could attend vcat, but possibly risk losing a position order as tenants do have a clause to apply for consideration under hardship. He pays his rent (weekly instead of monthly, but the still pays) and he looks after the house. We all know the property is an investment so the member would have possible grounds to revoke the 120 day notice.

    1. We could consider offering a 6 month lease, extend the current tenancy until his back is better under good will, advising at the end of the day, we still want the property back, but, due to his circumstances, we would extend by 6 months to assist his current situation before issuing a notice to vacate end of fixed term lease. – that way, if he tries to fight it in 6 months time, we look like the good people, who extended a 120 day notice an additional 6 months to try and help the tenant out.

    Please let me know what you would like to do. I advise the tenant that I can’t guarantee an extension, and that if there was one, I would literally be driving around to the house so he could sign it on the spot and have it all done and dusted (To avoid any postage delays, time lag issues, possible changing of mind).


    If you wish to proceed to VCAT after he does not vacate (As he will not he has advised it is physically impossible), let me know. Some supporting evidence I will need from you is a documented letter / emails that detail what you were told before you bought the house (tenant paid on time, in advance) so we can show he pays weekly and is not in advance as he should be, and in particular, documentation of his conversation with Moe, the handyman saying bad things about either the landlord, agent or property.


    Rent wise, you’re getting $360pw. I’m not sure if you’re aware, but there is a lot of new construction not too far from your house. You don’t have air-conditioning, Similar listed houses are achieving $350pw right now. For example below brand new;


    http://www.realestate.com.au/property-house-vic-wyndham+vale-406054186


    Financially, because he is paying rent, it will be better value for you to keep him right now, than have to fight to get him out (the process takes approx. 2 weeks to get a hearing date, if we win possession, then another 3 weeks for the police to physically come and evict the tenant… and usually during that time, the tenant stops paying rent), we obviously cannot show the property when there is an eviction in process, so the chances are there would be a vacant period of 1 to 2 weeks between this tenant being removed, and a new tenant moving in.


    Have a think about what you would like to do and let me know. I still think there is a high chance we could win possession, my concern is getting a vcat member that is tenant sympathetic because despite the legislation, VCAT members can make a judgement call based on their opinion, even if it is specifically against wha the legislation entitles a landlord to do.
     
  11. Tom Rivera

    Tom Rivera Property Manager Business Member

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    Your PM sounds experienced to me, I think they've carefully considered the situation and advised you well at the time.

    $20wk isn't a hugely excessive increase, though you'd need very solid evidence that market rent for the property has increased rapidly in the last six months (assuming the PM was accurate in February).

    Has the tenants health recovered? Was he advised in February that it would likely be his last lease- meaning if you issued notice now, he's likely prepared and willing to comply?
     
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  12. dabbler

    dabbler Well-Known Member

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    2 things.

    His health hardly matters in my logical view, as being a removalist is a job....i.e anyone can move, you just pay.

    The second point is, if I had a place close by there and vacant, I would go myself and help your tenant move into my place, seems he is paying all the time and *ABOVE MARKET* and looks after the place......GOLD :):):)
     
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  13. L3ha7

    L3ha7 Well-Known Member

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    Hi @Tom Rivera , I believe nothing issued in writing stating about last lease.
     
  14. L3ha7

    L3ha7 Well-Known Member

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    Hi @dabbler , he is not paying more than market. Above details are from Feb. Secondly everytime there is an inspection he doesn't take PM calls or respond to email then the process of chasing him.
     
  15. L3ha7

    L3ha7 Well-Known Member

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    I like to put myself in someone else shoes and given that his medical condition etc. We did decide to let him recover but we can't let tenant run over us.
     
  16. Sharyn C

    Sharyn C Active Member

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    If any tenant is not happy with a rent increase they can lodge the matter with consumer affairs. They will then get at least 2 other agents to inspect the property and provide a rental figure along with evidence of similar properties in the vicinity. Provided you are not increasing the rent to more than "market rent" consumer affairs should report to the tenant the increase is fair. If the increase is deemed higher than "market rent" then the tenant can go to VCAT, VCAT will then decide what rent the property should be and this figure will be locked in for a 6 or 12 month limit.

    From what I have read you have already issued the tenant with a 120 day NTV. Your property manager is correct the tenant will find it harder to fight a NTV - end of fixed term tenancy than a 120 day NTV. With an end of fixed term tenancy there is little to argue as long as the notice and time periods are all correct at worst the tenant may be given a little more time to vacate but a 120 NTV can be overturned entirely by VCAT
     
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  17. Tom Rivera

    Tom Rivera Property Manager Business Member

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    @Sharyn C great advice! I'm glad someone from Vic piped in, I'm hazy on the more specific details of your system.

    @Newfast I meant more so whether the PM had discussed with the tenant that it might be his last lease, so he was psychologically prepared to receive the notice to vacate at the end of this lease. If at all possible, tenant cooperation in these situations is infinitely valuable, so we try to be as sympathetic and helpful as possible.

    How does the Property Manager feel about him? Are they frustrated enough with his attitude and belligerence that the time expense of a vacate and re-letting process is appealing, or are they happy to manage the situation? This question might help you make the decision as to whether you should apply the rent increase or ask him to leave.
     
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  18. L3ha7

    L3ha7 Well-Known Member

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    Thanks @Sharyn C for the insights.

    @Tom Rivera -thanks for your input and advise. I got somethi g to think about.

    How can I get the rental market details? I searched and RE , domain and other sites all have different information.
     
  19. Tom Rivera

    Tom Rivera Property Manager Business Member

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    Historical data on comparable properties is the primary information used to come to a fair market value. Your Property Manager has the best tools to extract and consolidate this information with tools like RP Data and Pricefinder (subscription based property databases). They also have the experience in that area to know how properties rent- time on market, rent achieved, etc.

    Existing availability is also considered. We all have full access to Realestate.com, Domain, etc. so you can research this yourself. You're looking at the rents being asked for highly comparable properties in the area, and roughly how long they've been available (setting the sort function from "Dates - Oldest to Newest" and checking page visits is about all you can do to get an idea of how old the ads are).

    There are a number of resources available that give broad statistics for an area, but they tend to be skewed and only vaguely relevant to specific properties. For example, two or three cheap units rent and suddenly the quarterly average rent drops for the area, even if the reality might be that the market is moving upwards.

    I've recently been introduced to Property 360 (Research any house or address in Australia | Property 360) which has only just been released, so I'm not sure how comprehensive it is. For your purposes it can function as an accessible property database that gives you access to historical data.

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    TL;DR
    Your Property Manager should be able to provide a Comparative Market Analysis (i.e. market value for your property), but there are resources available that will allow you to do your own research.
     
  20. dabbler

    dabbler Well-Known Member

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    What I read reads at or over market.....I think your PM has a clue TBH
     
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