What to do when your tenant defaults on rent. No property owner or property manager want to encounter this, but unfortunately it can happen. In this market insight, we discuss what to do when your tenant defaults on rent.
If a tenant breaches their tenancy agreement by falling behind in rental payments its very advantageous to manage this situation promptly as it can save you time, stress and money.
It is not always easy to resolve the problem, so we take the opportunity to provide some support in this market insight. Your property manger will be the most trusted and reliable partner in this case, so please ensure you discuss the situation in detail.
What you should to do first up
As soon as you’re aware the tenant has fallen behind in the rent, your property property manager should be contacting the tenant to address the situation and ascertain why they are behind and when it will be paid. If the rent payments fall further behind shortly after, you should immediately issue a breach notice to prevent further loss. It is important to note, a breach notice cannot be issued until the tenant is a certain number of days behind in payments. This number varies depending on the location of the property.
When can I issue a breach notice for a rent default?
Each state in Australia is different, but we have summarise a few of the states for your records.
- Victoria and New South Wales – There is no date to issue a breach notice. This means you can issue it once it is one day overdue by provide the tenant 14 days to pay the amount in arrears.
- Queensland – If your tenant enters rental in arrears after seven days, you can issue a breach notice. It’s also known as a remedy breach which provides the tenant with seven days to pay the outstanding amount.
- Western Australia – You can issue it once it is one day overdue by provide the tenant 14 days to pay the amount in arrears.
There are a number of documents that accompany the breach notice. Your property manager would liaise with you and help with the process. It is very important to issue the breach notice correctly. If it is done incorrectly, it can cause more problems and you may be looking to address this in a court or tribunal system.
What do I do if the tenant doesn’t pay their outstanding rent?
If you are unable to resolve the rent in arrears, the landlord and property manager may be able to issue a termination notice and end the lease agreement. This requires another step-by-step process, but having an experienced property manager will help immensely.
Can landlord insurance help?
Landlord insurance is a great safety net when something goes wrong. Demonstrating a thorough and prompt process of issuing the breach notice will help you become entitled to a claim.
Landlord cover is most valuable when you have rent in arrears. Policies will differ among insurance providers but its common to see a policy cover you for up to six months loss of rent. Terms and conditions apply so seeking advice to sourcing the right policy is critical.
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While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
September 2023
