Desperate times: a case study in the value of due diligence

Couple Signing LeaseIn a cautionary tale for landlords and property managers alike, a story from the west has highlighted the perils of renting to people you wouldn’t normally choose.

Recently, a Perth landlord found herself $1000 out of pocket when a decision to take a chance on renting her unit to tenants backfired.
The self-managing owner felt pressured by high rental vacancy rates to accept the tenants. To her detriment, she neglected the usual due diligence. It was a move that saw her in court to get the bond money back after the tenants stopped paying rent for six weeks then fled east without leaving a forwarding address. Unfortunately the bond covered about half of the lost rent and she was left $1000 out of pocket.
Although it may be tempting to jump at the first tenant that comes along, particularly when the market is tough, the value of due diligence cannot be underestimated. Thoroughly screening applicants may pre-empt problems down the track. Background checks may include:
  • Close scrutiny of information supplied in the rental application
  • Identification verification
  • Speaking with previous landlords and property managers
  • Checking written references (landlord, employer and character)
  • Confirming income and employment status
  • Searching the National Tenancy Information Centre of Australia database
Despite the best of intentions, sometimes circumstances conspire to cause financial grief for landlords. While the Perth landlord admitted to renting to tenants whom she would not normally accept, the real problem arose when the tenants lost their jobs. Job loss, relationship breakdowns or illness are often unforeseeable, and there are important steps landlords can take to ensure they don’t wear the financial fallout.
The right insurance cover can provide protection against all manner of tenant issues (unpaid rent, accidental and/or malicious damage, theft, broken leases, legal costs). Talk to us about a policy to safeguard a landlord’s financial position should things go wrong.

On the flip side

A story about a young family on the Gold Coast has highlighted the need for renters to be careful who they deal with too.
Struggling to find a home, a couple placed an ad in an online classifieds website seeking a rental property. Their elation at finding a place to call home was short-lived when they lost their $1,400 bond to a scam.
Contacted about a home they could rent, the couple were told they could not view the place as the owner was away in Perth, but they were assured that once the bond payment was verified, the keys would be couriered over.

Before sending the payment, the would-be renters asked to see some ID from the owner. A copy of a driver’s license was sent and the pair was convinced the offer was legitimate so they sent the bond. Unfortunately it turns out the ID was from a stolen identity – the ‘landlord’ was never heard from again and the family was $1,400 out of pocket.