Can I Sue The Real Estate Agency for Finding Bad Tenants?

LDelhiBelly on 13/11/2014 - 13:06
Last edited 14/11/2014 - 15:28

I leased out my property through a real estate agent and signed a fixed term lease with tenants. 3 months into the contract the tenants want to break the lease and get out of contract. We are in the process of finding new tenants, but the current tenants have now stopped paying rent and the matter is going to VCAT. The property manager is either untrained or slack.

The rental agency charged me 1 week rent as letting fee, advertising fee and ongoing monthly fee. I really wonder what background checks they performed on tenants and from my point of view they FAILED at providing a service of finding quality and reliable tenants.

Can I sue them to recover the money they charged me for what has been a very poor service?

Financial

Comments

  • mrpopo on 13/11/2014 - 13:30
    +4

    Read the contract you entered into with the rental agency - if they have breached a term of the contract you may have an avenue for recovery.

  • ozhunter on 13/11/2014 - 13:34
    +14

    Lol, how was he supposed to know with certainty that they were bad tenants.

    • 2shoes on 13/11/2014 - 13:39
      +8

      Agreed. They helped you to select a tenant. These things just happen sometimes.

      Unless the agent lied, or purposely didn't tell you something useful that they knew about your tenant, it's not really their fault is it?

  • isthisreally_me on 13/11/2014 - 13:52
    +1

    Agree with above, the charge for letting is pretty standard so no issues there. As for the tenants, no background / reference check will reveal someone deciding not to pay at some point, it can only decrease the likelihood based on past practices.
    In short, no you cant sue for bad tenants or what you believe are bad tenants.
    This is why you have rental insurance.

  • mick123 on 13/11/2014 - 13:57
    +3

    Didnt your agent collect 4 weeks bond. Have they confirmed you will have access to that? If you're thinking of suing them, why are you letting it again with same agent? or are you going with new agent?

  • eqv on 13/11/2014 - 14:27
    +3

    Is there anything wrong with the property? It seems weird to me that the tenants wants to break the lease for no apparent reason..

    I've seen real estate agent and landlords who only care about getting rent paid on time, but refuse to address issues with the property that's reported by the tenants.

  • QW3RTY on 13/11/2014 - 15:23
    +1

    No. You cannot.

    No management agreement has the clause:

    "In the instance the Lessee defaults by breaching an essential term of this Lease, the Managing Agent is financially responsible to mitigate the loss of the Lessor."

    But in all seriousness, and as everybody else above me has said — if they've kept to the terms of the Management Agreement (which wouldn't have a 'Performance' clause), there's nothing you can do. Bad tenants happen — thats why the almighty Lord, Vishnu, created rental bonds.

    Better luck with your next tenants!

  • cypher67 on 13/11/2014 - 15:29
    +10

    I think your being completely unrealistic. You're the one renting out the property, therefore you are the one that needs to accept the risk should a tenant leave. The property manager (PM) can only do so much and in their contracts it would state the events/fee's should a tenant leave/break the contract. You will have 4 weeks bond available to cover the costs of finding a new tenant. If you were involved in the leasing process, the PM will collate a list of tenants and you will choose, if you waiver this option and let them choose then you are still liable. If you are unhappy with the costs & services of the PM, then find a new one.

    Key to a good investment is being involved, the best landlords are the ones that dont hide behind the PM, it is just the easy option most take. I have a fantastic relationship with my landlord to the point they ditched the PM because we were such good tenants, saves them ~$500 a year. Its your investment, start taking ownership.

  • [Deactivated] on 13/11/2014 - 16:10

    3 months into the contract the tenants want to break the lease and get out of contract

    Did they give any reasons for wanting to break the lease?
    Also if they break the lease and have formally notified you of this, they don't have to pay the rent. However you can claim back the loss you've incurred in terms of unpaid rent after you find a new tenant to move in. Linky

    • ozgriff on 14/11/2014 - 20:14
      +1

      It is unclear if the property is empty and they can't find new people or if they are still living at the premises and refusing to keep paying rent, which isn't the same thing as vacating.

  • Almost Banned on 13/11/2014 - 17:10
    +2

    At first glance you have at least two possible courses, maybe three.
    Firstly, is there a term of your agency agreement (either express or implied) that they have breached?
    Secondly, have they been negligent?
    Lastly, have they breached their professional obligations?
    Under either the first or the second you can potentially institute proceedings - query whether this is worth it.
    Under the last you can lodge a complaint with the registering body.

  • danb on 13/11/2014 - 20:02
    +1

    If the tenants are breaking the lease, arnt they the ones liable for the letting fee, advertising costs plus rent each week until a new tenant is found? Ive been caught by this several times

    • scynaz on 13/11/2014 - 21:49
      +1

      It's generally a fixed amount I think (six weeks rent iirc was what I had). But if the tenants won't or can't pay, your only choice is the murky world of collection agencies etc.

      Regarding leasing out your own property, don't. Going by your tenuous grasp of the legalities involved it would be a terrible idea. Find another agent, do more homework this time, ask them about what background checks they do, and ask for more specific info about prospective tenants when they do find one.

  • maximum on 13/11/2014 - 20:07

    This is why I manage my own properties. You still can access the tica database and do more reference checks than real estates do. I rang about 3 properties last week and although they are still listed for lease I haven't got a call back. They don't care. They'll get their weeks rent when they list and will continue to take their fees even if tenants don't pay.

    • nahi11 on 13/11/2014 - 20:37

      How do you access the tica database?

      • maximum on 13/11/2014 - 21:32
        +3

        You have to pay, when I joined it was $120 and I got 20 checks . They also have info , checklists and leases to download (I used to pay at the newsagent for a lease before this). Obviously it brings the cost down if you have more than one property. I find it weeds out the dodgy people if they know you are checking - they have to sign that they understand you use tica. It is more expensive now $198 for 30 checks. Just google tica and press join button for details.

  • cloudy on 13/11/2014 - 21:49
    -1

    Its instances like these I giggle when people tell me no one losses money investing in property.

    Do u have landlord insurance, sometimes it's possible to cover loss of rent.

    • plmko on 13/11/2014 - 23:21
      +5

      Well it's not like they've 'lost' money on the propery.

  • Tcm9669 on 14/11/2014 - 09:07
    +1

    I was in a similar situation like yours about 6 months ago (but more complicated due to an untrained agent informing me WRONG things).. but anyways the part that really relates to yours is.. tenant wanted to break lease after 4 months, she stopped paying.. didn't return the keys (at agents fault) and left rubbish in the backyard.

    Only things I could do were:

    • Take bond after making a strong case with VCAT
    • Bug agent enough and escalate with directors to pay for locksmith (due to agents fault I had to bring locksmith) - although legally they were not obligated in anyways.. they did it to keep me a happy customer
    • I cleaned backyard, fixed broken walls, re-painted ruined fresh paint (I had just painted before they moved in), fixed shower, tiles, cleaned carpets etc…
    • I still missed out about 2 weeks rental - Bond did not cover everything.
    • Declared all cleaning expenses on tax
    • Got a new agent (within the same agency.. but requested a SENIOR agent.. not an untrained newbie)

    Then, I upped my rent and waited 2 months to find a good tenant that always paid on time (so far… touch wood) and kept my house clean and well maintained. When tenant complains about anything, I respond within 24 hours and get it fixed.. all done via email in writing just in case a VCAT case is needed. Emails and written evidence are keys to show who (profanity) up and where. Coz trust me, tenants will blame you for them not paying rent (oh.. but he didnt fix this).. well… you never mentioned that did you. Anyways, childish games that can cost you. Don't trust the agent, NEVER, always do your own research on consumer laws (including rental etc) and know your rights and obligations and respect your obligations as this will be key when you have a case to get your bond.

    Anyways, in a nutshell.. no you can't sue them for shit as they are not responsible and they can show they did "reasonable steps" but they cant control the tenant.

  • DARK KHAOS on 14/11/2014 - 09:24

    Get landlord insurance with someone like Terri Scheer.

    • Repi on 14/11/2014 - 23:04

      Agreed, we had to go through the tribunals for a tenant not paying rent and damaging the property. By the time the courts agreed the tenant has to leave the place needed a complete rebuilt. The insurance (AAMI) worked out pretty good, even though we had to make up a bit of the shortfall.
      We took the Real Estate to Fair Trading, the watchdog without teeth. In the end they recommended to lodge a civil claim against the Real Estate. It all turned out to be to difficult and we agreed with the Estate Agent on a small re-reimbursement and moved on.

  • shadowarrior on 14/11/2014 - 11:26
    +2

    I have worked in RE as a property manager for some time in QLD and the process was always:
    - shortlist tenants, present the list to the owners, the owners have the final say, we might recommend someone if the owner asks our opinion.

    So if your agent did that, and you did play a part in selecting the tenants, then you could be equally blamed for finding a wrong tenant. Did you give the RE agency written permission to select and finalize tenants on your behalf?

    I know it's a bad situation, and in no situation the tenants can stop paying rent, that's a VCAT issue straight away. But a background check can only reveal so much information. Ask them if they performed a tenancy history check using any of the online databases and ask them the tenant's rental history record. See if they had a trend for breaking leases and not paying rent. If you can find one, then the real estate agent should not have short listed the tenants. Ask for documented proof of them performing background checks on your tenants, see if you can prove with documented evidence that they failed to run the background checks.

    But if they have done all of that, and you were happy with the short-list, then it's just one of those unavoidable rental property risks. If you have insurance for your rental property as a landlord (not house insurance) then you might be covered for the expenses.

  • DelhiBelly on 14/11/2014 - 13:45
    +1

    Thank you everyone who took out time to reply to my message.. I’ll summarise my reply below:

    1. The house is 3 years old, with all modern amenities and in A1 condition.

    2. The tenants are young couple in their mid-late 20s, who wanted to move in together for the first time. Both working in admin/clerical office jobs.

    3. Reason for breaking lease is that one of them lost job and was unemployed for a brief period of 2-3 week. She has since joined another job.

    4. As per the lease contract the tenant is required to pay rent until a new tenant is found or lease end date. But since they have stopped paying rent, we had to issue them “Notice to vacate”, which means if they vacate within 14 days of notice they have no obligation to pay rent after that date.

    5. REA collected 4 week’s bond. In following the legal process of waiting 14 days of unpaid rent, then 14 days notice, etc., the “must vacate by” date is 6 days more than what bond will cover. Also bond is for claiming any damage to property or tenants leaving property in mess, not for adjusting rent.

    6. This the first time I rented out a property and that’s why I choose to go with a reputed REA to minimize risk and stress. The tenants were the only application we got in 1st week of open house and the agent recommended that they have done checks and the application looks good.

    7. I’ve LL insurance and the excess is a little more than 1 week’s rent.

    From the responses above, looks like it will be hard to ascertain whether or not the REA did enough due diligence in doing background/employment/past rental history/reference checks.

    I’ve been a tenant for 9 years before buying my own home and never troubled REA or LL. In fact I always got 100% of my bond back from every house I rented. But, looks like I’ll suffer some financial loss in this deal, don’t know how much just yet.

    So, the questions that cross my mind are:

    Is it that easy for a REA to say “Sorry, bad luck” and move out of their professional services duty?

    Is it that easy for the tenant to break the lease (by stop paying rent) and move out of a legally binding contract?

    • scynaz on 14/11/2014 - 14:40
      +8

      You haven't mentioned a single specific fact to show how the agent was negligent or acted unprofessionally. In fact, by naming the agency publicly, and repeatedly suggesting that they acted unprofessionally or negligently, do you realize you may run foul of defamation laws: http://www.lawstuff.org.au/sa_law/topics/defamation

      Someone who browses this forum may report this post to the agency, and you will probably receive a legal notice from them if that happens.

      You didn't read your agreement with the agent, even now you can't be bothered to do basic legal research, you would rather rant on a forum, and you expect people to feel bad for you?

      Of course the bond is meant to cover rent owed, not just damage.

      You'll lose 6 days of rent. Too bad. Australia has laws that tend to favour landlords more than most other countries. And tenants have it far from easy here.

      Next time, don't be greedy, reduce the rent by $50 a week, and then look through applications, you will get far more. Or be more patient. If you only got one, and you had several inspections, you set the rent too high.

      Apart from the the rental registry check, real estate agent checks are not very thorough. You would be well aware of that if you have been renting for several years. I don't even remember the last time I was asked for original documents. They are not the ASIO. You are not the ASIO either. Just because someone is renting from you doesn't mean their life is an open book for you or an agent to peruse.

      Not are agents soothsayers, I have known people who stopped paying rent and there was nothing in their background that would have predicted that.

      Yes it is easy to break a lease and move out. The consequences come later when you have collection agencies chasing you and you can't get loans, credit etc. For this small a debt you would never get to the point of the court garnishing their salary to force them to repay debt. Some people don't understand potential consequences. Some may not care, their circumstances may be too bad to get loans etc anyway, or they may be moving back overseas for example. Some would just end up declaring bankruptcy.

        • netsurfer on 14/11/2014 - 22:17

          It is very common that when the tenant decides to break the lease and/or stop paying you rent, the tenant is very likely to continue to doing so, even if they do have some money to pay some of it.

          Also, from my experience, the bond, even when used to compensate the unpaid rent will end up being insufficient. It is mainly because: (1) tenant knows there is the bond and they are unlikely to get most if any of it back - so they prefer to let it drain to 0 and (2) agent gets the first cut - the agent will deduct their fees from there and ask you to pay any gap.

          Unfortunately, to tell you the truth, a lot of agents will advice you that the couple's combined income is sufficient to cover the rent. However, when one of them loses that income for a period of time, problems can occur. It is somewhat a gamble. Similar things happened to me. These things do happen. The most important things is to get new tenants. If your current property manager does not get his/her act together and find you a tenant soon (or not trying hard to do so), it is time to switch.

          Whether you find a good tenant depends on a few things: luck, screening, and whether you are willing to take a bit of risk or you are willing wait for a while for better tenants. Unfortunately, since we (landlords) do have the final say, we cannot just blame the agent. And, we did pick the agent. However, we can learn from the mistake and move on (new tenant and if required, new agent).

    • lgacb08 on 16/11/2014 - 15:44
      +1

      I think you're new to the landlord profession and set your expectation a bit high and this disappoints you. Landlord are always the one who make the final decision and REA always has the clause in the contract to minimise their loss in situation like this. You agreed to rent out to the first applicant in only one week so it looks like you're after quick solution to recoup your investment, no wonder it has a risk. Move on and learn mate, or sell the property and put the money in the saving accounts if you don't want to take these risks.

  • shadowarrior on 14/11/2014 - 14:10
    +1

    REA collected 4 week’s bond. In following the legal process of waiting 14 days of unpaid rent, then 14 days notice, etc., the “must vacate by” date is 6 days more than what bond will cover. Also bond is for claiming any damage to property or tenants leaving property in mess, not for adjusting rent.

    I'll double check that. Bond can be used to adjust unpaid rent.
    http://www.legalaid.vic.gov.au/find-legal-answers/housing-an…

    Breaking lease or whatever does not in any ground give the lessee any right to stop making rent payments.

    • DelhiBelly on 14/11/2014 - 14:42
      -1

      Exactly, I agree, the purpose of bond is to protect the property from any damage caused by tenants, not for the tenants to stop paying rent when they want to vacate.. So, I can feel happy about the bond being there but it may not be enough if there is any damage or house vacated in messy/unclean state..

  • baker bob on 14/11/2014 - 15:14
    +2

    Keep their bond, kick them out, apply for lost rent through your landlord insurance.

    Don't take this stuff personal, sometimes life happens and tenants cannot help it. You are covered through bond and LL insurance. Just move on. Definitely wouldn't blame the REA.

  • YOTR on 14/11/2014 - 20:31
    +2

    OP, unfortunately no one has answered your question.

    YES, you can sue the REA.

    But you will not win.

    • kingmw on 14/11/2014 - 22:06
      +3

      If you sued, the lawyers will be the only ones that win.

  • netsurfer on 14/11/2014 - 21:57
    +1

    There are some really dodgy real estate agents out there. Some of the things the really bad agents do:

    • Do not pay your bills on time (so you incur late fees), but they still deduct the money from your account.
    • Don't bother with the regular inspections.
    • When they only have 1 applicant applying, they asked you to take it.
    • Late statements, late / missing invoices.
    • Really dodgy annual reports (the ones which do not balance properly and does not match the statements, and have wrong dates).
    • Under calculate your rent received (but never under calculate the agent fee) - and blame the system. Basically, under pay you.
    • Use system upgrade as an excuse for sending reports late to you every month
    • Refuse to open for inspection until the current tenant moves out.
    • Still insist on you thanking them for finally send you the statement which is 3 weeks late.
    • Take ages to arrange the repair.
    • Don't bother returning your calls.

    My advice: access your agent and as soon as you notice something is wrong or they are doing something sub-par, change as soon as possible. Trust me, don't give them a second chance, the bad ones remain bad and can get worse. I learn my lesson the hard way.

    Don't try to save on commission and pick the cheapest. It is not worth it. You will end up paying for it one way or another (i.e. slow finding new tenant, losing opportunities on potential tenants because they are lazy to open for inspections, dodgy statements etc…).

    Also, do double check the statements. Some sneaky ones will missing one of two days rent each month, but over a year, you ended up losing 1-2 weeks of rent. There are good ones out there, but you need to find them and they tend to cost a bit more (but they are worth it).

    • JimB on 03/12/2014 - 13:54

      If a few of the above were happening, then you should change agents asap. There are warning signs.

      I've a good agent.

      I thought about bypassing the agent before as the long term tenants have been good, but in the end for the $100 a month the agent charges (tax deductible), it's not worth it for me.

  • [Deactivated] on 15/11/2014 - 01:17
    +2

    "My advice: access your agent and as soon as you notice something is wrong or they are doing something sub-par, change as soon as possible. Trust me, don't give them a second chance, the bad ones remain bad and can get worse. I learn my lesson the hard way."

    Figure out if the person learns from mistakes. Sometimes it is worth keeping an employee/agent after they have made a technical mistake as they've learnt their lesson and that lesson was at your expense.

    However, if it a "mistake"/flaw of character, treat like a gangrenous appendage - amputate immediately.

  • DelhiBelly on 16/11/2014 - 22:34

    Thanks everyone for your kind advices. I'll keep you posted with what happens next week…

    • jaybmate on 04/12/2014 - 22:53

      so what ended up happening?

  • jd4free on 05/03/2017 - 20:29

    Over 2 years later Delhibelly still no response, what happened in the end ?
    I know from my 30 years experience, people don't care about Landlords.
    Lucky you didn't get all your walls punched out and backyard burnt down (like we did ) ..
    tenants often get away with so much more in NSW, QLD is so much better.

  • DelhiBelly on 06/03/2017 - 22:03

    Well in the end, I let the the tenants break out of lease as I was afraid they might do malicious damage to the property. They cleaned the house and bond was fully refunded. The property was vacant for 3 weeks before we found another tenant. I did not pay REA letting fee 2nd time… and life goes on….

    • [Deactivated] on 26/03/2017 - 09:46

      It seems a more reasonable outcome than that you originally had in mind. Even you had gone to court I don't think you can hold tenants in your property if they have urgent circumstances that they need to leave. It's somewhere in the rules.

  • Braintrain1000 on 24/03/2017 - 21:48
    -3

    You're just a landlord not god. You need to understand that tenants have full right to break the freaking lease as they might want to move interstate or wanting to find a place thats closer to their new workplace etc. I am sorry but i think you're one of those greedy landlords.

  • jellykingdom on 27/03/2017 - 16:48
    +2

    Can i just say how surprised I am by the reactions on here. Especially the people who are essentially calling OP a greedy jerk because he's annoyed that his tenants stopped paying rent and he will be out of pocket. He isn't trying to get them to stay or telling them they can't leave so I don't think its particularly unreasonable that OP doesn't want to lose money that he is entitled to…

    You wouldn't call a guy running a newspaper stand a greedy bastard because someone stole a newspaper from him and he wants the money back

    Also only just realised this is an ancient thread haha…oh well

  • DelhiBelly on 28/03/2017 - 20:43

    Thanks @jellykingdom.. For what its worth and now that its an old thread I can share some more details.. The Tenants were young couple in their 20s, both working full time office jobs.. They had no previous rental history as they were living with their families and moving together for the first time. Initially they said that the women lost her job but she found another after 2-3 weeks.. At the time of dropping off keys the women casually mentioned to REA that the couple broke up and she is moving back with her family.. and I paid the price for their failed love adventure!!

  • Louise6194 on 09/12/2017 - 21:40

    @DelhiBelly , I got more worse situation than You had before, the agent didn’t follow my instruction and approved one application by sending the approved email to a tenant without my permission, and push me to sign the lease, I refused to sign the lease, the tenant went to the VCAT with the approved Email, the VCAT sent the order to the agent that give the key to the tenant, when the agent received the order, the agent cancelled the agreement with me , now , the tenant moved in and refused to pay rent, the agent didn’t lodge the bonds for me , the tenant refuse to sign the bonds lodgement form.
    The agent sent me the VCAT order about 6:00 , the key in the agent office , so I had to give the key to the tenant second day ,
    And also the tenant request the compensation ,( stress loss, salary, hotel….. due to the key received on second day.

    It drove me crazy, I don,t any way to go.

  • DelhiBelly on 16/12/2017 - 10:43

    @Louise6194 - Sorry to hear about your experience. I didn't know VCAT could force REA/LL to give keys to shortlisted tenant. In my opinion, a rental application approval email simply mean the tenants are shortlisted and move to the next step in process, where they deposit/lodge bond money, 1 months rent, sign agreements, etc. If the tenants fails to do any of these, the LL can always reject their application and select someone else. The same goes for tenants as well. One of my shortlisted/approved tenants withdrew his application on day of lease signing saying he got approval for another property which he likes more. My experience till date is that REA wants to lease out the property ASAP (and with minimum effort), but I stick to my guns and not compromise on tenants profiles, even if it means the house may take 3-4 weeks longer to rent.

    Your case definitely sounds like REA failed their duty of care.. I suggest you post this as a separate thread on OzB and folks may have some helpful advice to offer..

Login or Join to leave a comment
Login Join