Tenant signed contract then decided not move in

Hi,

I have a tenant interested in our property in mid of June. wants to move in 4 weeks time. They paid one week deposit, because they live in interstate, PM asked them to signed lease agreement prior to the moving date 15th July to secure the property.
Late last week, they decide not to move in anymore due to personal reason. PM say to them its breaking lease, they will need to pay for re-advertise fee, any rent until they find a new tenant from 15th July. They refuse to pay. They haven't paid bond either so there is nothing PM can hold them with.

Just want to get everyone 's advice on how to recover lost of rent 4 weeks or could be 6-8 weeks.
1. Go through insurance?
AAMI says even the tenant signed the lease agreement, but move in date didn't start until 15th July. If they tell us before hand that they not decide to move in, really the contract didn't start.
2. Go through tribunal?
Will them think the same as insurance? Success rate? Might takes 3 weeks time.

thanks

 

Dear Realto 1
scenario may be
Q.What kind of Real Estate Agent agent signs a lease without taking bond payment in full? Plus 2 weeks rent in advance?
A. One that will pay the rent for you themselves until a new and suitable tenant is found
because you will make a formal complaint to Fair Trading etc etc .
p.s your insurance may probably not pay out because of the above.

 

Did they sign a lease?

 

Just to clarify, have they actually signed a lease?

[edit: Terry beat me to it! ]

 

Get your PM to immediately start the search for a new tenant if it is not already being done.

You are obliged to mitigate any loss you may seek to recover from the tenant or from insurance.

If the agreed start date of the lease was 15th July (as you said), that is today so at the moment you have not lost any rent. So how do you figure you have “lost” 4 weeks rent already? Maybe I am missing something?

There is no way you should lose 6-8 weeks rent.

Get the property rented asap then worry about chasing up the legalities.
Marg

 

I think the 4 weeks is referring to Bond, then the mention of 6 to 8 is bond + two weeks or four weeks?

Pretty unclear tbh.

 

The bond belongs to the tenant until any dispute is settled, either by agreement or by a tribunal order.
It doesn’t belong to the OP.
Mar g

 

Sounds like that's what he's getting at though. He could be entitled as they've essentially done a runner (if the contract was signed.).

 

Yes, but the tenancy was said to start on the 15th July, today, which is when rent will start to accrue, not 4 weeks ago.
Confusing unless we get more detail.
Marg

 

This is what my thinking is, the REA would've had 4 weeks to find a tenant.

That's not to say you don't have a case.

I may be wrong, but if you can't find a tenant for the same rent as leased to the original leasee then you may be able to seek compensation, hopefully your insurer has more information, may need to escalate it up to get people with more know how.

Did you find another Tenant?

 

Federal contract law = offer + acceptance + consideration. Sounds like you had all 3 of those. We've won cases here without a signed lease as a contract still exists with those 3 things.

Break lease procedure is slightly different in each state, but here the steps are roughly:
1) Find a new tenant (preferably quickly, as tenants are able to argue you didnt mitigate their loss)

2) Once you have a new tenant, this gives you a date to work from for calculating rent

3) Advertising cost + letting fee + rent til start date of new tenant = bond claim. In SA you could do this as a Silent Claim which doesn't involve Tribunal, if its rejected then go to Tribunal afterwards. In other states you dont have that option, so probably have to go to tribunal with it - make sure you adhere to step #1 to maximise your chances.

4) If bond is not enough for #3 , claim on insurance. Most insurers will only cover rent portion and will want the bond used up first, so its likely the amount of this claim will be zero or very low.

Its a little unclear on the timing of your issue, maybe you can clarify further. Since you dont have a bond that becomes a little bit harder, but process shouldnt change much. If they award you $X at tribunal, you'll have to chase that up yourself separately (or Barclays will do it on your behalf for free if you're a member like my agency is [and by extension all my landlords are]).

 

In my experience and personally speaking, I would not stop advertising the property until the first months' rent as well as bond has been received. Leaves too much room for situations like this to arise.

 

What are the success rates for Barclay in your landlords cases?

 

100%
But a lot of them are slow drip. But some is better than nothing.

 

Cool thanks,
I didn't go with them once because the Internet reviews on their success rates was very poor

 

NSW does have a change re fixed break costs in leases. I am told that all new new leases have the fixed cost requirements but can't actually find documentation regarding this.

Breaking a lease early

"The break fee is a penalty a tenant agrees to pay if they move out before the end of the fixed term.

If the fixed term of the agreement is for three years or less the break fee is:

• six weeks rent if the tenant moves out in the first half of the fixed term
• four weeks rent if the tenant moves out in the second half of the fixed term.

If the fixed term is for more than three years and the tenant and landlord agree to include a break fee clause, they can agree on the amount and write it into the agreement.

If the tenancy agreement does not include a break fee, a landlord may still seek compensation by applying to the Tribunal. These costs may include loss of rent, advertising and a letting fee if the landlord uses an agent. If the tenant and landlord are unable to agree on the amount of compensation, the landlord may claim from the bond or apply to the Tribunal."

Personally I would just move on as I suspect it will take some doing chasing the prospective tenant in another state.

 

I disagree, I'd be chasing the PM for not securing bond + 2 weeks and leaving it solely up to them. It's their screw up imho.

 

Apologies - been busy with a newborn. The time quickly flies.

The tenant wanted a move in date which was 4 weeks out hence we got the holding deposit, signed contract first.

Bond is not paid until they usually move in, or close to the date. I can’t remember if I paid bond upfront before moving in or not into my rental?

I guess this wasn’t what we were expecting for them to skip!!

Yes, PM started advertising again
- Called insurance AAMI - said even though they signed but didn’t move in - insurance cannot be claimed? Contract was signed. I guess bond is used in this case to recover this case and others.
I assumed whatever they said was correct until had some opinions on this matter.

- I was uncertain if going down the tribunal route would be the best choice or trying to argue back to AAMI that it should be covered for loss of rent.

Dan
- I am not too sure how chasing PM may help in this instance. May put more people offside uncessarily?

DT - I think given what AAMI has said, I’ll follow up again and see how rent load cna be claimed. Ie. 6 weeks after supposide move in date.

Or is this best handled going through tribunal and forget insurance - especially where they expect bond to cover 4 weeks. Means I get back 2 weeks + excess which is effectively like 1 week rent from insurance!

 

Not to my knowledge. You sign the contract, you pay the bond and 2 weeks rent in advance.
Doesn't matter if you're moving in next week or 4 weeks time. It's all done at the same time, or in very quick succession.
The absolute maximum my PM's have given is three days to pay bond and advance, or we sign the next person.

That's how my PM's have been doing it, and that's how it was when I was renting 7 years ago.

Your PM has stuffed up.

 

Thanks mikey7/ sparklestorm - I think PM to change their process re: bond to minimise out of pocket for these type of issues. Will do this across my IP going forward.

Not much can do with PM - they may or may not play ball.
Will be going down tribunal route first before insurance