Tenants not paying rent is one of the major risks faced by those who invest in property. Resolving any such situation can be a lengthy process and could mean an extended period where your investment isn't generating income. While some risks are largely unavoidable, knowing your rights and the correct procedures can help you minimise potential losses.
Read more: Tips and guides for property investors
How to deal with a tenant not paying rent
The process for addressing a tenant missing their rent payments generally follows these steps:
Step 1: Contact the tenants
Regardless of the official process in your state or territory, if your tenants are a couple of days late, it's worth you or your property manager getting in touch before a formal notice is issued. Particularly if their tardiness is unusual.
They might simply need a couple extra days while they wait for their salary to come in, or perhaps they forgot to check there's enough money in their account, had a transaction issue, or simply forgot. When there's an easy fix, it generally isn't worth the hassle of starting official proceedings.
Step 2: Send a breach notice
After a certain amount of time elapses without a rent payment, the next step is usually issuing a breach notice. Most states have a designated period landlords have to wait before they can issue a formal notice to the tenant giving a deadline for payment to be made by and outlining the consequences of not paying.
Step 3: Issue a notice to vacate
Once the set period is up and rent still hasn't been paid, landlords can issue a notice to vacate the property. The amount of time before you can issue a notice to leave varies from state to state - typically from when the breach notice was sent or when the missed rent was due.
In some states, a notice to vacate can be given to tenants that are persistently late with rent. This will depend on circumstances and the relevant tenancy authority will generally consider the effect on both parties before making a decision.
A notice to vacate gives a tenant a certain amount of time to move out of the property. They may dispute it, which typically means it will be referred to the state tenancy authority for resolution. In other cases, the tenant may ask if they can pay the outstanding rent and stay. Again, whether landlords have to agree to this varies from state to state.
Step 4: Get a court order
The eviction process can become difficult if tenants don't leave within the notice to vacate period. In such cases, landlords generally need to get in touch with their state or territory's tenancy authority for a ruling. The court may then issue a warrant of possession, which means the tenant no longer has the legal right to live at the property.
If they still won't move out, landlords need to get a formal eviction order from the tenancy authority. Once this is issued, the police will probably force the tenants to leave the property.
Step 5: After eviction
Once the tenants receive an eviction order, the landlord is allowed to change the locks to the property. It's also usually worth doing a formal inspection in case there's been damage to the property or other issues need addressing.
The landlord will generally be able to keep the bond to recoup some of the lost rental income, but only after submitting an application to the tenancy authority for this to happen.
Finally, a landlord insurance claim can be made after the tenants have vacated the premises.
Rights of non-compliant tenants by state
New South Wales
| Breach | Notice to Leave | Eviction |
|---|---|---|
| A tenant is in breach after one missed rent payment. | If the tenant misses a rent payment, the landlord or property manager can issue a termination notice, giving them 14 days to pay. |
If the tenant has been given appropriate notice to vacate and has neither left nor paid the outstanding rent, the landlord can apply to the NSW Civil and Administrative Tribunal (NCAT) for a termination order. NSW has a 'general guarantee' that a tenancy cannot be terminated if the tenant pays outstanding rent or utility charges, or complies with an agreed repayment plan. This applies even after NCAT has made a termination order. |
Victoria
| Breach | Notice to Leave | Eviction |
|---|---|---|
| If tenants are more than 14 days late on their rent. | In Victoria, if tenants are more than 14 days late on rent, the landlord or property manager can issue a notice to vacate. It's recommended to try to reach an agreement with the renter beforehand, however. |
After those 14 days are up, the landlord can apply to VCAT for a possession order to force the tenants to move out. VCAT will generally dismiss the application if the renter has had fewer than five notices to vacate for unpaid rent in the last twelve months AND the rent has been paid by the time of the hearing. |
Queensland
| Breach | Notice to Leave | Eviction |
|---|---|---|
| Once a tenant has been in arrears for a week, Queensland landlords can issue a Notice to Remedy breach. The tenants then have seven days to pay the outstanding amount. | If the rent is still unpaid after the breach notice expires, the owner or property manager can give the tenant a notice to leave. They must provide a minimum of seven days to move out. |
If the tenant still doesn't move out or pay the rent after the notice, the owner can lodge an application with QCAT to end the tenancy. This needs to be made within 14 days. If successful, QCAT will make an order to end the tenancy and issue a warrant of possession. |
South Australia
| Breach | Notice to Leave | Eviction |
|---|---|---|
| If a tenant falls more than 14 days behind on rent they are in breach in South Australia. | The landlord can issue the tenant a breach notice which specifies they will need to move out if they don't pay up. | If the tenant doesn't pay rent or vacate, the landlord needs to get an order from SACAT for the tenants to vacate the property. |
Western Australia
| Breach | Notice to Leave | Eviction |
|---|---|---|
| If the tenant is more than one day behind in rent, landlords can issue a breach notice that gives a 14-day window that rent needs to be paid within. | After the 14 days are up the landlord can issue a notice of termination, giving the tenant seven days to vacate the premises. | If the tenant still won't leave, the landlord can apply to the Magistrates Court for an order to terminate the agreement. |
Tasmania
| Breach | Notice to Leave | Eviction |
|---|---|---|
| If a tenant is behind on rent by 14 days or more. | Once a tenant falls more than 14 days behind on rent, property owners in Tasmania can issue a notice to vacate, giving the tenant seven days to leave. | If the tenant still doesn't leave, landlords can apply to courts for a 'vacant possession' order. This needs to be done within 28 days of the notice to vacate taking effect. |
Australian Capital Territory
| Breach | Notice to Leave | Eviction |
|---|---|---|
| Landlords can issue a notice to remedy to tenants that fall into rental arrears, giving them seven days to pay. | If the tenant still doesn't pay, the landlord can issue a notice to vacate, which gives the tenant 14 days to leave. | Once the notice to vacate period expires, the landlord can apply for a termination and possession order (TPO) from ACAT. |
Northern Territory
| Breach | Notice to Leave | Eviction |
|---|---|---|
| Once a tenant has been in arrears for more than 14 days, the landlord is allowed to issue an RTO3 notice. | Landlords need to have issued an RTO3 notice before they can apply to terminate the tenancy. | If the tenant is still in arrears by the repayment date, the landlord can apply to NTCAT for an order for termination of the tenancy and possession of the property. |
How to avoid non-compliant tenants
As a landlord, you'd likely prefer not to have to go through the above. Not only is it a time-consuming and potentially expensive process, kicking someone out of their home is a tough call, no matter the circumstances.
Screen tenants
Landlords might be able to avoid taking on a tenant likely to fall behind on their rent by selecting people who have a good rental history. You or your property manager should review tenants' employment history, rental history, and criminal record before you offer any lease agreement.
Maintain good relationships
A good relationship with your tenant can be beneficial if they fall behind on their repayments. If you have an open relationship, your tenant may be more comfortable letting you know if they're having trouble meeting their rent sooner.
An adversarial relationship isn't good for either party. While it might be tempting to think purely in terms of your investment, your tenants are human beings who may well face homelessness if you evict them. Compassion never hurts, and open communication channels help find a solution that benefits both of you.
Read more: Making your investment property more appealing to tenants
Get an appropriate landlord insurance
Some landlord insurance policies cover loss of income if a tenant stops paying rent. It might be another expense on top of everything your investment property already costs, but like any insurance policy, landlord insurance will likely be well worth it if you ever have to make a claim.
A sound insurance policy should cover loss of rental income, as well as malicious and accidental damage and legal liability. Check your insurance policy and seek professional advice to ensure you have the appropriate coverage.
Collections: Property Investment How to's
Share