Xenia's property management quick tip - Following up Rent Arrears

I'm not going to post here things that you can quickly search on the internet - ie "a tenant needs to be given a breach notice if they are over 14 days late in paying the rent", they then need to be followed up with an order for vacant possession if the breach has not been remedied.

All good but a bit boring and I find that most people can benefit more from real life experiences that happen within a property management agency.

Today I attended a tribunal hearing, breach notice was sent with a 7 day notice to remedy arrears which were about 14 days at the time.

Arrears were partly remedied. That is the tenant who was paying $450 per week put themselves on a payment plan and started to make $1000 per fortnight payments.

We pushed on with tribunal order because it was not remedied in full?

Why would we do this despite the tenant making a reasonable effort to remedy the arrears?

Because every property should be managed as if there is going to be an insurance claim at some point, if an insurance assessor had picked up that arrears had occured at some point - where was our tribunal order for a payment plan?

If they tenant decides to stop the payment plan of $1000 per week, then what recourse do we have to re-enforce it.

The tenant has made a few constant $1000 payments since falling in arrears and today at the hearing they were exactly $150 in arrears. Not much I know, but we do have a payment plan enforced by tribunal order now and no ambiguity in this file.

This case highlights the importance of ensuring that all arrears are handled precisely following a system and not using judgement in property management - ie they will be OK since they only fell behind a little bit and they are catching up. Taking short cuts in property management can get you in trouble later, ensure a precise system is adhered to.

 

Good post @Xenia
Most offices use the strategy of sending the Form2 (Breach notice) on day 16 instead of 15. This allows you to seek remedy of $1800 instead of $900, using your $450 per week example.

Essentially section A would read:
The breach is as follows: Rent not paid in accordance with the agreement.
Rent of $900 due on 5/2/16 unpaid for period 5/2/16 to 18/2/16
Rent of $900 due on 19/2/16 unpaid for period 19/2/16 to 3/3/16

Section B would then read:
Pay $1800

And the above form would be served on 23/2/16 instead of on 22/2/16 as it would in a 15 day example. The vacate date if not remedied in the 7 days would then be 3/3/16 (serve by email rather than post, so as not to wait for delivery time) and I'm all for getting maximum money for landlords. If they don't vacate or remedy, then the tribunal will likely put them on an official payment plan - I'd rather them be paying off $1800 than $900 as it takes 3 weeks plus to get a hearing where there'll probably still be no more additional rent coming in.

This is the sorta thing you don't get from Google or SA Tenancy website. Perhaps give it some thought.

 

Xenia, having just been through something similar with a tenant, I completely agree with you. In my case, as soon as my tenant saw that we were going to the tribunal when she wasn't paying her rent, she paid up--immediately. At that point we could have cancelled the tribunal hearing, but we went ahead. I've no doubt that had we cancelled, the tenant would have fallen in arrears, again. The tribunal ordered that, if the tenant did not pay rent due on the day, we could immediately get a warrant to get her out. Tenant was never late again with rental payments.

 

Good result BK. Always pays to keep following through on the process regardless as you never know what can happen (and it can take time to book another hearing).

 

Tried one that always pay in tribunal, followed by payment the next week, then do the arrears again the next next week. Tribunal again, do the same thing again 3 times. I told the property manager this time even if the tribunal rule the tenant to stay, terminate using the usual process

 

In what state? There's relatively newish legislation here that lets us in SA go for eviction after 3 attempts.

There's precedent set on this - a lawyer thought he could outsmart the system by not paying rent. Paid it in full day before tribunal day. After 3 times the tribunal told him to get out of the house.

 

NSW

 

Mine was in a one-year lease. I had to give her 26--yes, twenty-six--weeks notice to get out. She refused to go even after the 26 weeks. Had to go back to tribunal. She was a nutcase and a scammer. She said my evicting her was 'retaliatory'. ACT Housing found her another place eventually.

 

This is really helpful, and very topical for us right now.
I'm about to ditch our property manager over how they have handled (or failed to handle) our tenant who is in arrears.
The first we heard of it was when we didn't receive any rental payment from the PM trust - at that point they were 4 weeks behind ($625/week!) They were then short the following week, but then started paying rent with extra to catch up. The tenants committed (to the PM, not a tribunal) to pay at least $1000/week until they caught up. So theoretically the tenant would be caught up in 6-7 weeks. The entire time this has been going on we have had to harass our PM about getting updates on progress, then the agent managing our property left and the firm didn't pick up where they left. We repeatedly asked for weekly updates and the PM failed to do this until prompted.

Last week the tenants didn't pay again, and we advised the PM to issue the 14 day notice.

I get that sometimes tenants will end up in arrears, and I don't blame the PM for that. I am extremely disappointed in how the PM managed the issue, and in particular their communication with us.

Cheers,
Inertia.
p.s. can anyone recommend a PM in Newcastle?

 

When looking at risks within a property there is a low low chance that a tenant will trash a property but a higher chance that arrears will occur. Finances are one of those things society does not handle well.

We find that most financial problems occur due to sickness, loss of job or relationship breakups and these are not things that can be screened well in a tenant screening process.

However we can control how we mitigate the risk of losses to the property due to tenants facing financial hardships.

Always let the tribunal put a formal plan in place where action can be taken if plan is breached - my point of this post.

Good luck in finding a pm and a good tip is to partner with one who is also an investor and focused on maximising the performance of the property and the cash flow it's producing.

 

Exactly, and that is what we understand has happened here. We are not aware of the full details, but there was illness involved.

[QUOTE}
However we can control how we mitigate the risk of losses to the property due to tenants facing financial hardships.

Always let the tribunal put a formal plan in place where action can be taken if plan is breached - my point of this post.[/QUOTE]

I'd like to think we are nice people, and are prepared to facilitate a repayment plan, but if someone is unable to financially commit to particular level of rent, they should probably rent somewhere cheaper.

Getting the repayment plan formalised by the tribunal is a good idea, and something I will keep in mind in the future!

Thanks, time to start interviewing!

Cheers,
Inertia

 

I'm glad that is now behind you BK.
In hindsight lots of things could have been handled differently to prevent what happened but so happy it's moved on regardless.
I've had tenants like that before too, they do not bother me any more

 

This thread is making me think I need a PM for our NSW IP! One tennant is great, always paid up on time, the other is always 10 days behind, sometimes more, however he does pay a premium rent at least 10% above what I would expect to re-lease it for.

We will have to give him notice later this year and I'm worried he will just stop paying rent. Unfortunately no LL insurance as the original PM let him move in after paying only one week rent and then didn't provide payment details to either tennant for a month! The slightly troublesome tenant has been behind ever since.

 

This makes me cringe, a property manager invalidating landlord insurance, that's one of the first things that should be in place.

There was one time in my office when we first started managing properties where one of my property managers "forgot" to take out an insurance policy for a landlord. One year later we were making a claim for all sorts of things, pool damage, rent default... the landlord kept telling us that she was ensured by one of our specialists insurers that we recommend, all good ....so we thought.

When we put in the claim - there was no insurance. But there was a form in the landlords file stating - agent to arrange insurance!!! OMFG.

We paid out the entire claim to the landlord... then told her that we Effed up, then paid for insurance for her for the following year.
All forgiven but extremely expensive EF up for us.
Here's another thing - get a property manager who will guarantee their service and ensure that you face no financial hardship ever as a result of their management.

 

The agent had a very bad reputation and was one of only two with an office in the suburb. She sold up last year, things were so bad she only had 3 sales listings all of which had been on the market for 1 year +

I don't think there is much point getting an agent in now. The tennant has our email/phone and will continue to contact us regardless and I don't mind going to tribunal if it comes to that.

 

You're probably handling it better than that pm was anyway.

 

We have a decent relationship with the tennant now but when that eviction notice gets served it will all be out the window. If he keeps paying rent, happy days. If not it won't cause great difficulty it will just stop us from renovating and holiday letting for a while.