How's the tolerance levels? Missed rent can be tricky to resolve - here's some helpful hints and tips...
Let’s get a few things straight before we get into managing the rent. Firstly, the tenant/s is the person/people named as such on the tenancy agreement – they are legally responsible for paying the rent. Secondly, for rentals with multiple tenants, i.e. students, if one person causes the rent to be missed or be short then they are all liable to pay the debt if the offending tenant does not. And thirdly, for a flatmate, not named on the tenancy agreement, they are only liable to pay the rent to the tenant, not the landlord. For this reason, we highly recommend anyone living at the property is named on the tenancy agreement as it protects everyone involved.
We all want to avoid rent arrears no matter what. Here are few things we suggest to ensure you stay on top of rent coming in.
- At the start of a tenancy make sure you ask for rent in advance and 3-4 weeks bond before the tenant moves in
- Set up a rent pay system – same amount, same method, same day every week, in line with the tenants’ income pay day. You could even ask for it to come direct from their income source (WINZ or employer). It is also worth ensuring your tenants understand what paying rent in advance means so there is no confusion down the track
- Check rents are paid regularly (every week or fortnight)
- You must maintain good records and give a copy to the tenant if requested and give receipts for cash payments as per Section 45 RTA
- Follow up rent arrears immediately
- Review the rent level annually and either increase/decrease or leave it as is
- Remember, the payment of rent is the most important issue for a landlord
We find that having a strict zero tolerance policy for rent arrears works best and a clear process to follow if rent is missed. It is important to outline the process to the tenant on the terms and conditions of the tenancy agreement before they move in. That way both parties have signed the agreement, so that if a tenant does miss a rent payment they already know what to expect and that they need to talk to you to rectify it promptly. Communication is key here and the good relationship you have formed should help resolve any issues.
Life does change and your best tenant may end up in a predicament where they are not able to pay rent as promptly as they used to. Many people’s situations have changed due to the COVID-19 pandemic and as a result, there may be a need for tenants and landlords to discuss and negotiate rents. It is best to try and negotiate a repayment plan your tenants can afford and have this agreement formalised through Tenancy Services via a phone mediation. Tenants might also be eligible for support from various agencies and not-for-profit groups out there to help tenants in debt. We’ll have more about how to do this in upcoming blogs!
Our policy at A1 Property Managers for missed rent is as follows
- Day 1 – rent due
- Day 2 – if rent not paid, we phone or text to alert the tenant the rent has been missed
- Day 3 – if still outstanding, we send a ‘14 day breach’ letter
- Day 8 – if still outstanding, we visit the property to see if they have abandoned (only if no contact has been made) and apply to the Tenancy Tribunal
- Day 15 – we have phone mediation or wait for a Tribunal hearing. If the tenant is 21 days or more in arrears at the time of the application you can apply for immediate termination
Remember to consider your tenant’s history with you along with the benefits of keeping a tenant in place compared to the potential cost and uncertainty of changing tenants.
Lessons we’ve learnt
- Check the rent frequently to ensure it’s been paid
- You’ll always have a number of options when solving rent arrears
- Getting the rent paid directly from your tenant’s wages is a very good arrangement
- Rent payments sometimes improve after you take action
Rents can be increased by a landlord if the correct notice period is followed and certain conditions are met. Rent can also be reduced.
You need to give your tenants at least 60 days’ notice to increase the rent, being mindful of any service days to add on. Boarding house landlords must give at least 28 days’ written notice. From 12 August 2020, you can only increase the rent once every 12 months, this changed from once every six months and must be applied to market rent only.
If you want the ability to increase the rent on a fixed term tenancy you need to add a clause to your tenancy agreement that states something like, “The Landlord hereby reserves the right to review the rent annually and to increase it if required.” You would still need to give the tenants at least 60 days’ notice and only increase it 12 months after the date the tenancy started, provided it’s not within 12 months from when the last increase took effect. Remember, the notice must be served correctly, be in writing, state how much the rent is increasing to and the day the increased rent is due.
Managing missed rent payments can be very challenging and it’s important to know your tolerance level for situations like this. Some people handle this stuff with ease and for others feathers will be ruffled relatively quickly. Work out what’s best for you – dealing with tenant issues can be very stressful and push you to the limits quite quickly. As property managers we handle rent arrears daily and because we are effectively the “middle-person” we have a non-emotional approach, respecting the three-way relationship which more often than not results in a positive outcome for all.
Have you got a tricky tenant or tenant debt your having trouble with? We’re always here to help and offer some free advice, feel free to contact us 03 351 7643 or [email protected].
An active investor with her husband Hamish, Claire loves to inspire & inform others & works alongside the team ensuring we continually grow to provide a high quality service.