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What to do when your renter is in arrears?

While buying an investment property is an exciting experience, investors need to consider a few things when leasing out a property.

While buying an investment property is an exciting experience, investors need to consider a few things when leasing out a property.

Most people will seek the services of a real estate agency’s rental department, and when a property manager is in charge of the arrangement, the agreement between renters and rental providers is pretty straight forward.

However, the possibility of delayed or missed rental payments should be considered.

This is arguably the biggest concern for a landlord or rental provider and can become a bit of a liability as most tenanted properties still come with their own expenses, whether the rent has been paid or not.

What is rent arrears?

As the rental provider or the property manager handling the rent exchange, usually a monthly rent due date is set at the start of the leasing agreement. If a renter is late to make payment and they have missed their due date, they are in arrears.

So, what do you do if the renter is in arrears?

First and foremost, it is important to take action early to minimise potential loss on your end. Attempting to find a resolution between both parties through your appointed property manager is a great first step and could avoid dragging out any unwanted issues.

Your appointed property manager will work to find a mutual resolution, and this may be an extension of time or a payment plan. However, if both parties can’t agree to some flexibility or the renter simply cannot pay, then rental providers have the right to take formal action.

If a rental payment is more than 14 days’ late, a rental provider can give the renters a notice to vacate. This is a formal statement declaring the provider wishes to terminate the rental agreement and the renter is required to vacate the property. However, once the notice to vacate is served, the renter has 14 days to make a payment as a way of showing their intention to stay. The renter can pay late on four additional occasions within a 12 month period showing their intent to stay. When a renter pays within the 14 days after serving the notice to vacate, they Residential Rental provider cannot take action. And the notice to vacate becomes null and void.

On the 5th occasion of a late payment within a 12 month period, regardless if the renter makes a payment, the Residential Rental Provider can apply to VCAT for a possession order. The five strikes policy was introduced with new Residential Tenancies legislation in 2021.

It is important to understand a renter has the right to challenge the notice to vacate through The Victorian Civil and Administrative Tribunal (VCAT). If the rental provider is granted a possession order through VCAT, the order gives the rental provider consent to take back possession of the property and this can be enforced by Victoria Police. This is also known as an eviction notice.

In response to a VCAT application on both ends, there is ultimately one of two outcomes.

- Issue the possession order

- Allow the renter to pay via a payment plan

Regardless of how well screened a renter may be, circumstances do change. A renter may lose their job, have a relationship breakdown, become ill or have unforeseen expenses that plunge them into debt and often when a renters situation changes, so too does their ability to pay their rent. An owner’s risk can be minimised with a proactive and reliable property manager from one of the many offices in the Barry Plant network.

The Barry Plant Group has more than 300 property management staff handling some 34,000 properties. It also offers individual management plans to suit a particular property, as well as a sliding level of involvement for an owner who may wish to retain the ongoing management of their property.

Navigating the Residential Tenancies Legislation can be difficult and if you get one step wrong you could find yourself with extensive debt. Having a knowledgeable and professional Property Manager working for you, can certainly ease the burden when it comes to managing rental arrears. A Barry Plant property manager will help you to minimise risk and maximise return from the beginning and will then work with you throughout each and every tenancy to achieve a successful outcome.