So, your tenant is now a few weeks behind in rent… you have issued a breach notice asking them to catch up on payments… but they just can’t seem to get on top of what is owing. The next step – issue a termination notice.
It is not a decision landlords and property managers should take lightly. But, if the time comes when issuing a termination notice becomes the only option, it’s important you understand the dos and don’ts (because no one wants to end up in legal hot water!).
The rules for termination vary between states and territories and you should follow the steps outlined by your residential tenancy authority. If you don’t, you could be taken to court or tenancy tribunal and be ordered to pay compensation to the tenant. It could also affect any insurance claim you need to make.
This is where you should start…
If you have issued a breach notice, and the tenant hasn’t caught up in payments, it might be time to say goodbye to your tenants. You should do this with a written notice to vacate.
This is when you can issue a termination notice
- If the tenant hasn’t fixed the breach within the set date, you can immediately issue a Notice to leave (form 12), giving the tenant seven days to move out of the property.
- If the tenant hasn’t fixed the breach within the set date, you can immediately issue a termination notice (form 1a), giving the tenant seven days to move out of the property.
- Once a tenant is 14 or more days behind in payments, you can immediately terminate an agreement by issuing a Notice to vacate, giving the tenant seven days to move out of the property.
New South Wales
- Once a tenant is 14 or more days behind in payments, you can terminate the agreement (there is no formal termination notice, however you can use the sample termination notice provided by Fair Trading), giving the tenant 14 days to move out of the property. NOTE: Due to COVID-19, a six-month transitional period (following the moratorium on evictions) has been initiated. This may impact your ability to evict a tenant if their hardship is due to the pandemic. Here you will find more information.
- The notice to tenant to remedy breach of agreement (form 2) you used to notify your tenant of a breach is the same notice you use to note the termination date. It can be any day after the date you asked the tenant to remedy the breach by. NOTE: If the tenant is unable to pay rent due to the implications of COVID-19, a moratorium on evictions remains in place until 31 May 2021.
- If the tenant hasn’t fixed the breach within the set date, you can apply to NTCAT for a termination and possession order.
Australian Capital Territory
- If the tenant hasn’t fixed the breach within the set date, you can terminate the agreement by issuing a notice to vacate.
- Once a tenant is 14 or more days behind in payments, you can terminate the agreement by issuing a notice to vacate, giving the tenant 14 days to move out of the property.
If the notice is not served properly, it will not look good for you if the matter goes to court or tribunal. In fact, tribunals have been known to completely reject a landlord’s claim simply because the notice wasn’t served correctly.
What happens if the tenant catches up on rent during the termination period?
If your tenant catches up on rent, that is great news! In fact, in some states, this will void the termination notice. However, if you see a pattern emerging, you may like to consider applying to court for possession of the property (this is only applicable in some states and you should consult your residential tenancy authority/tribunal for more info).
What happens if they don’t catch up on rent and refuse to leave the property?
If the tenant does not move out by the date listed in the termination notice, you can apply directly to your authority/tribunal for a termination order, which ultimately ends the tenancy.
If you request a termination order, it must also come with an order for possession of the property. In a lot of states, application for a termination and possession order must be made within 14-30 days of the termination date (check with your tribunal for concrete timings).
Your correct authority
- Queensland – apply to the Queensland Civil and Administrative Tribunal (QCAT)
- Western Australia – must apply to court
- Victoria – apply to the Victorian Civil and Administrative Tribunal (VCAT)
- New South Wales – apply to the NSW Civil and Administrative Tribunal (NCAT)
- Northern Territory – apply to the NT Civil and Administrative Tribunal (NTCAT)
- Australia Capital Territory – apply to the ACT Civil and Administrative Tribunal (ACAT)
- Tasmania – must apply to court
In some states, if the landlord doesn’t live in the state in which the property is located, they MUST apply to court instead of the tribunal.
Example – rent default
These are the steps you should take in Queensland when your tenant is behind in rent…
Step one: In Queensland, if your tenant falls more than seven days behind in rent, you can issue a notice to remedy breach (form 11), giving them seven days to catch up in payments. You should promptly issue a breach notice on day seven of arrears, giving the tenant the required seven days to catch up on payments.
Step two: If the tenant catches up on payments, great! No more steps are needed. If not, and the tenant refuses to pay the outstanding cash within the timeframe, you can issue a notice to leave (Form 12), requiring the tenant to move out of the home within seven days.
Step three: If the tenant moves out within the timeframe, amazing! No more steps are needed. If not, you must apply to QCAT for possession of the property.
In an ideal world, the termination process would go smoothly – possession would be given, any damage fixed and any rental arrears made up-to-date before the tenants move out on good terms with the landlord and property manager. But, this isn’t always the case and landlords can find themselves out-of-pocket when their tenants fail to make good.
This is where having landlord insurance covering tenant-related issues is vital. Landlord insurance policies can not only provide cover for loss of rent, it can assist with legal expenses incurred during the termination process (including the cost for a warrant of possession in some states).
This is an example of how EBM RentCover would help… (New South Wales)
A tenant stops paying rent completely. Once the tenant is 14 days behind in payments, the property manager or landlord issues a 14-day termination notice. The tenant makes no attempts to pay the outstanding rent or vacate the property by the expiry of the notice, so the agent applies to NCAT for possession of the property. NCAT terminates the tenancy agreement and suspends possession for one week. The tenant still refuses to vacate so the agent requests a warrant of possession, which is carried out three weeks later.
In this claim (and if the policyholder were protected with RentCover Ultra or Platinum) EBM RentCover would typically cover:
- The period from the day after the rent was paid up to, to the expiry of the termination notice under rent default (in this case, 34 days). NOTE: rent default is capped at six weeks.
- From the date of the expiry of the notice until the tenant vacated under denial of access (in this case, 44 days). NOTE: denial of access is capped at 52 weeks.
- The time it takes to secure a new tenant under re-tenancy, only if the tenant is on a fixed-term lease (up to six weeks). NOTE: rent default is capped at six weeks.
- Legal expenses up to $5,000. In this case we would cover the cost of the original application to NCAT, the warrant of possession fee and the agent’s time at court.
- Up to $250 for change of locks because the tenant was evicted by a bailiff.
IMPORTANT: If a breach notice was not issued in a timely manner, there can often be a gap between rent default cover (noted above in the first dot point) and denial of access (noted above in the second dot point). This means there could be several days or weeks that are not covered. This is why it is super important to stick to the right timeframes when issuing tenants with notices.
At EBM RentCover we work with clients to minimise the emotional and financial stress associated with making an insurance claim by providing proactive customer service and support. While we hope our policyholders and their property managers never run into trouble, if they do, we’ll be there.
*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 need us we are there, contact 1800 661 662 if you have any questions.
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