It's every landlord's worst nightmare - a tenant who hasn't paid rent for weeks and won't vacate the property.
Landlords in this situation not only stand to lose out on rental income, but they also may not be able to access their property or find new tenants until their existing tenants leave.
Ultimately, this leaves landlords significantly out of pocket.
To minimise the risk of this happening to you and ensure your investment property remains profitable, it's important to be aware of the warning signs.
Make regular property inspections a priority - every three to four months while a tenant is living at the property - and look for any signs of neglect.
If the property is unclean, if there is an excessive amount of rubbish stored within its perimeters or if there is accidental or malicious damage to the property, it may be an early indication that your tenants could fail to fulfil their obligations of the rental agreement.
Monitoring arrears daily is also an important task.
If your tenant falls behind in their rent, the sooner you know about it, the sooner you can attempt to resolve the issue and mitigate any financial loss.
If you find yourself with a tenant who falls into arrears, I recommend that you take the following steps:
1. Send notices
Firstly, a breach notice should be sent to the tenant for non-payment of rent.
If your tenant still doesn't pay the rent after receiving the first breach notice, a second notice should be sent to terminate the lease and request vacation.
The number of days in rental arrears before these notices can be sent varies around Australia, so it is important to be familiar with your local tenancy laws.
If you are unsure of the format these notices should be in or have any questions regarding timeframes, get in contact with your local Real Estate Institute or state Consumer Affairs department.
Even if you are aware that your tenant is suffering from financial or personal hardship, it's still important to send breach notices on time and according to regulations.
If you delay sending the notices and you later have to make an insurance claim for loss of rent, your claim may be reduced.
2. Court order
If your tenant does not vacate the property by the date stated in the termination notice, you will be required to submit an application to the relevant tenancy authority to request a court or tribunal hearing.
The court or tribunal may then issue a warrant of possession to evict the tenant.
The processes around this are different in each state. For example, in Victoria, the police are required to accompany the landlord to the property to issue the warrant to the tenant.
Even then, the tenant may still refuse to leave, so a return to the tribunal may be necessary to gain an eviction order. In this instance, a bailiff or sheriff is likely to perform the eviction.
3. Change locks
After a warrant of possession or an eviction order is presented to the tenant, you are within your right to have the locks changed by a locksmith.
If the tenant is absent when you arrive at the property, you are legally required to place their possessions in storage for a certain amount of time. Again, the timeframe is different in each state, so check with you local Real Estate Institute or state Consumer Affairs department.
4. Final property inspection
Don't forget to formally conduct a final property inspection.
Outgoing condition reports with supporting photos and videos can be used as evidence if there are any further outstanding issues once the tenant has vacated the property.
5. Retain the bond
It's likely that you will decide to retain the bond to cover some lost rent.
If this is the case, you will be required to submit an application to your local tenancy authority to have the bond refunded to you.
6. Making an insurance claim
An insurance claim can't be processed until the tenant has vacated the property.
Contact your insurer as soon as this has occurred, and have copies of breach notices, inspection reports and photos and videos ready to support your claim.
Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker
Carolyn Parrella joined Australia's leading landlord insurance specialists, Terri Scheer Insurance, in 2004 and was appointed Executive Manager in 2009.
Carolyn oversees all operations within business, which aims to protect landlords against the risks associated with owning a rental property. These include malicious damage by tenants, accidental damage, legal liability for occurrences on the property that cause death or bodily injury, and loss of rental income as a result of damage to a property or a tenant absconding.
As a South-Australian based national insurance firm, Terri Scheer Insurance is the only company in Australia to specialise solely in landlord insurance.
Carolyn also owns two investment properties.
For further information, visit www.terrischeer.com.au or call 1800 804 016.