Real Estate Training - Rent arrears and procedures

Rent Arrears and Rent Arrears Procedure - Queensland

 A daily procedure carried out by all professional property managers is rental arrears. The everyday procedure includes communicating with tenants less than 8 days in arrears, issuing Form 11 Notice to Remedy Breaches to tenants who are over 8 days and seeking instructions from lessors in regards to tenants approaching the Notice to leave stage of arrears.

There is no doubt that communication is one of the most critical procedures when it comes to managing rent arrears. Education of the tenant from day one is also very important. Another critical factor is consistency; doing what we say we are going to do time and time again and never faulting from that position.

Tenants should be provided a rent arrears procedure at the beginning of every tenancy. Tenants should be requested to sign the best practice document to acknowledge understanding of the agency rent arrears procedure. For tenants who are 4 to 5 days behind, a SMS/Text is suitable on some occasions as a means of communicating, however in saying that Property Managers should not keep repeating the SMS to the tenant if the arrears become a regular occurrence. Phone calls are recommended in situations where the arrears are repeated to discuss the matter with the tenant. Ensure that files notes are maintained of all conversations and agreements with tenants in relation to their rental payments.

When discussing rental payments and arrears with tenants, ensure that commitment is provided from the tenant as to when payment will be made. Make a diary note of when they said they will pay and follow up the payment commitment by checking the tenancy ledger on the day they stated payment would be made. If the payment has not been made, phone the tenant to question why the payment has not been made as promised. If payment has been paid, send a SMS saying thank you for payment, or better still a courtesy phone call to say thank you. This procedure demonstrates to tenants that they are being monitored and also is great customer service.

It must be remembered that notices should be served in accordance with the legislation. Regardless of whether tenants say they are going to pay ‘the next day’, if a breach notice can be served, it should be. This is mainly due to risk management but also landlord protection insurance. Insurers may not pay a claim if it found that notices were not served accordingly. It is these situations that an agency can be held liable to pay for a lessor’s financial loss. If a lessor does not wish for a tenant to be served a Form 12 Notice to leave for rent arrears, ensure that their instruction is confirmed in writing. Such as

“As per your instruction, the notice to leave for rent arrears is not being served to your tenant at this stage. Please note that we strongly advise against this instruction due to risk management and possible unfavorable consequence if a landlord insurance claim is made in the future.”

Note: Lessors are required to be immediately notified in writing when a tenant is in breach of the contract/agreement. (As per the Property Agents and Motor Dealers Real Estate Agency Practice Code of Conduct) Best Practice is to email (or post) the lessor a copy of the breach notice with a supporting cover note explaining the notice and that they will be kept informed of developments relating to the breach.

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