VIC Tenant moved in and has not paid rent since

Hi Everyone,

I built my first property and decided to rent it. I found a tenant (single mum) and due to the ongoing lockdowns in Victoria at the time was the only application which I got as tenants were unable to inspect. Signed the lease agreement and commenced tenancy on 26th July 2021 and prior to moving in tenant paid bond and first month rent and the bond was successfully lodged with RTBA by PM. When the next rent was due, tenant failed to reply to emails and calls and finally responded a week later saying tenant had to quarantine and so was unable to work and requested one more week to pay the rent. So I gave one more week and tenant failed to pay and I instructed PM to send NTV after rent was overdue for 20 days. PM sent the notice to vacate and tenant did not vacate neither did she pay the rent and racked up more than a month rent overdue. PM tried numerous times to contact and sent emails about rent reliefs available and government support she can access but tenant just did not reply. On one occasion she replied that she had less work due to lockdown and then the next occasion she replied she can't answer calls from my PM because she has work everyday and did not even respond to emails. When we got the tenants application, tenant had savings as well as social payments income from centerlink as well as her job as a cleaner which had increasing income which she said due to covid.
After satisfying all the timeline requirements of VCAT, PM lodged a possession order with VCAT on 15th October 2021 at 43 days rent overdue. Tenant has continued to ignore calls and emails from PM and the grass around the house has grown for which neighbours have complained and PM tried to reach out for this and tenant still ignores. PM also tried to organise an inspection as it has been over 3 months and VIC now allows onsite inspections and tenant again does not reply.
PM followed up with VCAT on 16/11/2021 and noted that rent continues to be unpaid and now approximately $4000 overdue and VCAT responded hearings are delayed. It has been 7 weeks since application was lodged with vcat. As the tenancy had just started, I was unable to get landlord insurance for rent loss so I'm really distressed about this and worried how long tenant will continue to stay with the current rules and VCAT backlogs and want your help in applying any possible other avenues like courts and debt collectors.

My question
1) What are my chances of succeeding with VCAT hearing and has anyone in the above timeline received a hearing from VCAT recently? Just trying to assess whether VCAT would respond before christmas

2) What is the process of getting the money back? Would the vcat order be sufficient or debt collectors would be the option? What are the likely costs of applying to courts for the debt and timeframes to get an outcome?

3) If successful, would the sheriff's execute the warrant and remove the tenant or given that she is a single mum, they would continue to allow the tenant to stay untill the find a place?

4) What databases can I report the tenant about for unpaid rent and bad rental history?

Thank you so much for everyone's help.

 

So the tenant has paid rent since moving in or not? The rent arrears dates don't seem to quite line up?

 

If you've (your PM) has followed tenancy law stuff right, you will eventually get your orders for compensation owing and warrant of possession to evict etc, however due to no insurance you will then have to pursue them through the magistrates court and go down that rabbit hole, all up you could be looking at 1-2 years to get the money owed. Your PM will handle black listing on tenancy databases etc. I guess at least you used a PM, with that said, from the sounds of it, PM has been a bit on the slow side - but that could of been you giving discretion early on etc for benefit of the doubt but then the Tenant used up the good will and you won't make that mistake again...

 

I dont understand this, i have gotten LL insurance the moment I have a signed tenancy agreement, before tenants move in. I try and do it asap to cover myself as best as possible.

 

If you had an insurance policy, a signed lease and rent was up to date (which it was at the start of the tenancy as they paid 4 weeks in advance), you should have LL insurance? Which LL insurance do you have?

Have you called your LL insurance directly? You are possibly being advised incorrectly as either your agent didn’t organise the LL insurance or are too lazy to follow up with an insurance company.

I had a similar case in the past. Tenant was a real estate salesman for a builder and knew the system well. My LL insurer were fabulous, they paid us the lost rent as soon as tenant was out (3 months in arrears) and then privately sued the tenant for rental loss and legal fees which was lot more than rent he owed. In the end, it turned out he was friends with property manager so we fired the agent and never had any issues with future tenants in that property.

 

PM is definitely slow !
Should have served the required 14 days notice to inspect just prior to lockdown ending so that they had their foot in the door asap !
No tbe tenant doesn't have to be there.
This action should have stirred up the tenant !
As the tenant receives Centerlink you could possible have the payments garnished

 

The tenant paid 4 weeks rent upfront and the bond before PM handed the keys to the property. So 26th July 2021 to 23rd August 2021 was paid. No rent was paid ever since so I only got 4 weeks rent and nothing else. It has been 3 months now and continuing but no response for anything.

 

Thank you for the response. Yeah with the new rental laws in VIC, PM and I were very careful to follow the rules and initiate the 5 strike rule and have sufficient evidence prior to going to VCAT. I feel though like you said the PM has been a bit slow but with the current back to back lockdowns, and the VCAT stance on supporting renters, the PM suggested that it is good for us to give the the one week extra time tenant asked when the first rent payment after moving in was due as a sign of good faith. Like you said the tenant used it and still decided to not pay at all.

 

Apologies if the wording mislead but what I meant is I had not taken up a LL insurance for rent loss.
Prior to the bank making the final payment to my builder in May 2021, bank requested a Home insurance and we looked up many policies and most policies did not offer rent loss cover. As I had not put in the market to rent, I took up a Landlord insurance for the house at the time but this did not have rent loss. It was my mistake, as I was hoping to get a cover after tenancy started and cancel the previous cover but I did not get a chance and wtihin 4 weeks of moving in the tenant defaulted which meant all covers I take after tenant fell behind does not cover for rent loss.

 

Thanks for the response. I could potentially still request the PM to do this. So if PM serves the 14 days notice to inspect via registered post and acknowledge that tenant receipted it, is the PM able to go in and inspect regardless whether the tenant consents or not? As we are in the brink of getting a hearing, I have been cautious not to give leeway to the tenant to use up at VCAT to say PM harassed etc. so just wanted to understand the process to inspect and make sure the house is not trashed
Also with regards to centerlink payments being garnished, any idea where this could be done? Should i request PM to contact services Australia and report about this and the tenant? I have heard that there is a possibility to direct Centerlink payments for rent assistance directly to Real estate's trust account but not sure if by contacting service australia and reporting, this would be possible.

 

Rental loss is a policy option to many "retail" policies. And more typical for rental specific policies such as TS and EBM.

Garnishee of Centrelink is not likely to happen. Its protected money. Read the DSS policies.....The wording sounds harsh as it is harsh. ïe DSS monies are unalienable and the "saved amount" issue which also further protects accounts with DSS money.
8.4.3 Protection of Payment | Social Security Guide

You should be seeking actions to evict to limit further loss. It wont improve and then you need to walk away as you will incur a loss. Its a matter of how much incl of damage etc.. As its a legal issue the PM may not even be familiar with process and may be delaying the actions available.

 

Thanks Paul. Unfortunately, as a first time investor I wasn't aware of Terri Scheer and EBM until late and most other policies which offered as an option had stopped it at the time I was looking with the exception of AAMI and Allianz but AAMI pays a capped amount.
Ever since the first payment did delayed, I have instructed the PM the end goal is to evict the tenant soon as I felt that not making the first rent payment is a bad sign with all the savings and income tenant had prior to moving in. Unfortunately, the delays in VCAT and new laws are dragging this too long.
While I am waiting for the hearing from VCAT for the possession order, is there anything else that can be done? It has been 7 weeks since the application and I am hoping the hearing comes through soon but conscious that Christmas is around and if VCAT gives the tenant time to response, I am sure the tenant is likely to pull some excuse and delay even further and thereby staying longer rent free.

 

Thanks Y-man.

I was also told by the PM that the likes of this dragging for 6 months is highly probable. VCAT backlog has blown up and everything is getting delayed. To make things worse the tenant has in the very few times she responded, said to us that her sister is a PM and she knows the rules and that we can't keep emailing and contacting her for rent. Unfortunately, I have come to the assumption that the tenant may have used her sister as a rental reference and my PM has not picked this up which meant the tenant knows the delays in the system and is utilising to freeboard in the house without paying anything at all.

Sad to say rental reforms that came in 2021 made it even harder for landlords with having to collect 5 strikes but I am glad that tenant has not paid small amounts to come out of those 5 NTV's or else the chance of us getting a possession order is minimal as VCAT would knock back.

 

This should serve as a lifelong reminder for you and any one else new to property investing.

Your rental loss is tax deductible assuming you have a mortgage on your property so there is some relief in that sense.

More importantly, keep everything in writing and through your PM. Don't give her something she may be able to use against your in VCAT or elsewhere. These sort of people will try to twist things and try to show you as an aggressor. Last thing you want is an AVO taken against you which is a known tactic used by some tenants.

Wait for VCAT hearing and present your case. If there is nothing else to the story, she just can't walk away from the debt and will have to vacate the property.

She has probably done this a few times in the past and knows the rules. Her strategy is keep dragging it until you are just happy to see her back without worrying about the unpaid rent and she wouldn't want to drag this long because once the unpaid arrears in tens of thousands, it's more likely you won't forgive the debt and will go to magistrate court to get the money recovered.

 

Did you and your PM check tenant's employment background? I wouldn't rent to anyone who doesn't have a permanent or stable job with reasonable income.

 

What are these 5 strikes that you mention? I haven't heard anything like that being a requirement.

 

Thanks Standtall. It's good to know from this forum the different tactics used so we can be better prepared and cautious. I'm hoping the hearing comes in our favour as the tenant is just not responding at all and very conscious of the state of the house which was a brand new property and the likes of damages or trashing when leaving is quite inevitable from this type of tenants. Already the neighbours are complaining the grass is grown to about 4 ft high and no response from the tenant.
Would you know if VCAT will factor in things like she is a single mum so does not have a place to move to so therefore I have to take the loss and wait untill she finds a place? Or given the fact that no rent has been paid at all since the first 4 weeks the likelihood of the possession order is high if everything else was followed correctly?

 

Yeah employment checks were done as well as rental history and income was stable on top of centerlink payments received. She also had savings which did not raise any bells. As the privacy laws prevent the PM from giving us anything apart from the first name, it was only when the signed lease agreement was given I did a google search and found that the tenant's sister was a PM for a prominent real estate franchise nearby and raised the question why she never rented from the sister. It was too late then and I have the feeling that the sister was used as a rental reference and ordinarily if a PM from a good real estate gives reference it does not flag anything to reject.