New year, new rental arrears

The first three months of the year are prime time for tenants to fall behind and an ounce of prevention is better than having to claim for arrears.
 
Family Struggling FinanciallyThe financial strain of the festive season can sometimes mean tenants put buying gifts and celebrating ahead of paying their rent. As a result, the start of the year is when landlords find themselves tallying up the costs of rent arrears.
 
Historically, RentCover has found claims for lost rental income spike in January to March. And analysis of claims data reveals that the problem is getting worse – with an increasing number of claims being lodged, particularly in locations where the rental market is tight.
 
“We are finding that landlords with properties in WA and north-east Queensland, where the downturn in mining is biting, are holding off on issuing eviction notices,” explained Lush Edirisinghe, National Claims Manager.
 
“They often think that having a tenant in the property, even one not paying the rent, is better than no tenant at all. They also hope that eventually the tenant will pay up, but more often than not this is not the case and the landlords find themselves thousands of dollars out of pocket.”
 
Landlords can protect their rental income with tailored insurance, but the old saying goes, “Prevention is better than cure”, and owners and PMs can look at ways to minimise the risk of losses. Here are six tips:
  1. Screen tenants
    Background checks on prospective tenants are crucial (but make sure any checks you do comply with your state’s tenancy legislation). Check industry databases, call up referees, speak to previous landlords and PMs, and verify employment and income. Once a tenant has moved in, conduct regular property inspections.
  2. Communicate with the tenant
    A good rapport with tenants can often mean that they notify you of payment difficulties and a plan to tackle the arrears can be created to keep everyone happy.
  3. Put systems in place
    Having procedures in place to deal with unpaid rent means you’ll be on top of the issue. Subject to the laws in your state, contact tenants immediately when they are in arrears and request payment. A documented plan of addressing arrears should include timeframes for action (e.g. phone calls, letters, formal notices, tribunal/legal proceedings) and take into account the legislative requirements.
  4. Show some empathy
    Good tenants are worth their weight in gold, so if they are having temporary difficulties consider lending them a helping hand (if it is economically feasible). There are circumstances that can legitimately impact a tenant’s ability to pay (job loss, relationship breakdown, illness, unforeseen expense), but don’t accept just any excuse.
  5. Keep records up-to-date
    If you end up needing to evict or go to court over the matter, having all your paperwork in order will help your case.
  6. Know your rights and responsibilities
    You need to understand the legislated procedures and also why and how you can seek restitution or eviction.

Landlord insurance policyholders should also be aware that the eviction process needs to take place prior to lodging a claim. With eviction usually taking weeks, it’s important for landlords and PMs to act quickly in rent arrears cases to limit the financial impost endured before claiming and to also meet their obligation under the policy to prevent further loss. It’s also important to know that most policies will cover up to 52 weeks of lost rent depending on the circumstances (to a maximum of $1,500 per week).