Tenant Stopped Paying Rent

Tenant (in Victoria) stopped paying rent in February before covid-19 hits hard. With the current 6months moratorium on eviction, he is basically staying rent free while not communicating with the agent. We have already indicated to the agent that we are happy with alternate arrangement or discount on rent during this difficult time provided he communicates with us. Agent has already put in an application to VCAT (not sure whats going to happen).

Background: tenant rented for the last 18 months and lately rent has been delayed by 5-7 days minimum. We have allowed him to pay fortnightly instead of monthly when he requested.

We are happy to weather some of the loss for now. But this cannot go on for 6 months can it? No rent payment while being protected from being evicted? Surely there must be a consequence…

Update 1/04/2020
- so our agent has informed us that as this occurs before the moratorium /covid-19 situation - VCAT hearing will still proceed this friday and tenant has not indicated /communicated that he’s in financial hardship due to the virus

  • in terms of mortgage repayment our broker has told us not to freeze repayment if you can afford to as it will cost you more in the long run

  • many comments do suggest that landlords are loaded - yes some are but not us - we are both mid-30s and wife is currently stay-at-home awesome mum with 3 kids. I am working 5-6 days week also struggling with low market confidence.

  • landlord insurance in place - it can only be claimed once eviction noticed is issued (it will cover lost rents from the date of eviction). So if notice is issued this friday - we are already out of pocket from February to March.

Comments

  • +1

    There will always be some that take advantage in times like these. The first thing when there is a dispute is to try and have a good dialogue with them. It may be that the relationship with the tenant and the property manager may not be good. Let’s face it there are nasty property managers out there who have been able to flex their muscles freely because of the power position. Maybe consider dropping your property manager and deal direct with your tenant or find another property manager who is skilled in this area. If they stopped paying rent after being good for over a year then maybe they have a story of their own that nobody has been willing to listen to. This can affect people’s attitudes. Times like these can increase divisions or heal them.

  • +5

    For the landlord there's mortgage, council rates, water rates, management fees, strata etc.. All of these costs still need to be paid by the landlord. If rents are to be frozen then all of the above needs to be waived for the landlord as well otherwise the end result is the same as the landlord can no longer afford to keep a property to let out to tenants. This needs a holistic approach to help both parties.

    • Sounds like the LL should have savings for an event like this.

      Or not purchase an investment property when it puts them in such a precarious financial position that they rely on rent.

  • +6

    A friend and her housemate both lost their job.

    They tried to negotiate with REA to lower or end lease early with a break payment.

    REA said: "Your lease is unchanged and effective until July, go get the welfare payments"

    Some renters are aholes, some landlords are aholes.

    • Let’s hope it was just the agent who is a arse. Some of them don’t even ask the landlord

    • -4

      The landlord is an ahole because he wants to stick to the contract?

    • +4

      you seem to assume REA and landlord are the same - they are not.

      agents tend to seek the minimum work for the maximum profit for their business, with your property being only 1 of perhaps 500 properties they might manage. They will happily ignore your property when they are inundated with similar enquiries from hundreds of tenants and owners.

      owners/landlords tend to seek to protect the greater value of their capital investment which might be their single largest investment and entire retirement plan. So they seek to keep their investment healthy and minimise any risk of long term damage in terms of maintenance and net rent in relation to any tax deductions.

      • +2

        I made the assumption that the REA did their due diligence and asked the landlord.

  • I didn't see any response to the Landlord Insurance questions. Don't want to sound harsh but if your livelihood (i.e The property is NOT paid off) depends on it, then it would be pretty silly not to have a tax deductible landlord insurance.

    • +4

      most landlord insurance, IF it includes loss of rent due to tenant default, I think normally only kicks in after 6 weeks unpaid rent, and probably pays out a maximum of something like 6 months rent.

      So the landlord might have to absorb 6 weeks of no rent before they can start to claim on that.

      • Still good

        • I have car insurance, but if you damage my vehicle, you'll be paying, not my insurance.

          • +4

            @SlickMick: Ok sure. Not getting your point but whatever

      • Plus there might be an excess to pay. Mine is $300. A smaller excess means higher monthly premiums :-(

      • If my tenant loses their job due to the economic outlook (which stems from the Coronavirus) and stops paying rent, will I be able to recoup costs through my insurance?

        This would be treated as any other loss of rent claim and would be covered up to six weeks only.

        If a tenant tests positive for Coronavirus, is unable to work for a period of weeks, and falls behind in rental payments, the losses are unlikely to be covered under EBM RentCover policies.

        Source

  • +5

    Yeah this is where the whole eviction moratorium idea falls flat, it's relying on the tenant to act in good faith.

    Some people are just going to stop paying altogether and enjoy the free ride for six plus months until you can finally get them evicted.

    • +1

      There are arseholes from every side, literally can’t make rules to stop all of them

      • which is why it's so important to choose good tenants who aren't going to act like a$$holes.

    • +5

      I understand why the government did it, but it leaves it open to be exploited.

      I know someone that owns two apartments in the same block. He lives in one and rents out the other. His tenant has just pulled the COVID-19 hardship card and has stopped paying rent, but has seen the tenant still smoking regularly and coming back with cartons of beer etc. Essentially "no money" for rent buy has money for smokes and beers.

      It seems insurance companies are not covering the situation too, so Landlord's Insurance is of no use in this case.

      • +2

        Cigarettes and alcohol are essentials items.

        • +1

          Don't forget jigsaw puzzles too.

  • +4

    If tenants do not pay the rent or even do not talk to the agent, they will finally get evicted after 6 months and I am quite sure they will get a terrible reference check which means they are not able to get another property through agent anymore. That is really a short-sight action.

    • but pretty much everyone is short-sighted isn't it?

    • rental prices about to increase in 6 months due to these tenants

      • +1

        No, they won't.

  • +4

    Renters are screwed which in turn screws the landlords, the only one's profiting right now are the banks. It's not just a coincidence that the banks have suddenly gone quiet and avoiding the spotlight

    • +2

      Banks managed to secure their recapitlisation of payments and left the rest of the economy in the lurch.

  • +1

    Does not apply…. the tenant stopped payment b4 all this covet 19 occurred.
    contact the Dep of Faire Trading for advice

  • +6

    Hmm should be plenty of snark generated in this feed.

    It seems the collective opinion on OZB is that people who have the audacity to buy a property and rent it out in Australia are morally as bankrupt as Nestle.

    I own a property but had to move for work, selling the property isn't in my best interest so I am renting where I work and leasing where my house is, so I have one dog in each of these fights. But I feel because I am not in this "big end of town" my dogs are silky terriers with cataracts.

    • +5

      I own a property because I couldn't afford to buy one in the state I live with family, so I rent the property out. What people don't know is that 70% of investment properties are owned by mum and dad investors like us, what they actually think is that there are these big corporations out there that own big portfolios of Australian properties but that is just not the case.

      • PM decided to change the rules of play Billy , so let the games begin . Yes there are people in desperate circumstances and some that will play the new rules smartly .
        No doubt the action will add to capital depreciation of property .

        • +1

          Yes they have, but people are misconstruing the statements made. The PM keeps throwing around this term called 'hardship' this and 'hardship' that. For example, if you are experiencing hard ship you can go to centrelink and get a certain payment. There is a set definition for what person is eligible for that 'hardship' payment. The same thing will apply here, it is not up to the discretion of individuals to define how tough things are and then on their own assessment stop paying rent and then not get evicted. For example, if you cannot get the hardship payment from centrelink how can somebody self conclude they won't get evicted for not paying rent - there is a test and criteria applied to every individual circumstance. There will be some set definition around this but the sad part is that the PM did a very poor job in explaining this to the general public. If he didn't spend so much time blabbering like an idiot and spoke in clear concise wording, there would be no confusion surrounding this from the get go.

          • +3

            @TheBilly: Why doesn't he help out with the rent payments instead of deciding that landlords are charities?

            edit: fixed punctuation before the nazis jumped on me

      • +2

        A lot of Australians invest in equities either directly or with their super. Many have seen their portfolios shrunk by 30% since February. Losses and gains are all part of the game.

        • +3

          I own bonds, and the company would have to declare bankruptcy before they can get out of paying contractual obligations.

          As should a tenant.

          Renting a property isn't like gambling on the share market.

          • +1

            @SlickMick: Some investors like to speculate on shares while others like to speculate on RE. Investors that can’t handle the losses shouldn’t invest.

            • @whooah1979: contracted income = speculation? ok, let's agree to disagree

              • @SlickMick: That's a good one Mick. Contracted income. Clearly you're not a Shakespeare fan. I get it. But there's some lessons there.

      • what people don't know is that 70% of investment properties are owned by mum and dad investors like us

        Citation required.

  • I received the below statement in a letter from my property agent:

    "At this time, the date to receive further confirmation from the State Government and Real Estate Governing bodies has shifted several times and we continue to remain in a state of limbo."

    It seems the framework around how the policy will apply has yet to be defined?

  • +5

    keep track of all money unpaid, evict them once the moratorium lifts, engage a debt collector

  • People forget its just a rent freeze, they will still need to pay back the missing months rent.

    • +6

      yeah if you can actually get it from them, which is unlikely.

    • +1

      yes because a person struggling to pay rent now will have a seven fold increase in fortune over the next 6 months.

  • Does "no eviction" apply to all cases or only cases where tenants have and/or prove financial hardship only ?

    • +4

      Financial hardship due to Covid only.

  • The government is currently bailing out YOUR bank, so be thankful.

  • +3

    Surely you did think about bad tenants and fixed costs when you bought the property. We have been landlords for over 25 years, and even through the good times without pandemic we had some problem tenants.

    • Yes, we had a system in place with rigid rules regarding paying rent on time or getting evicted. What we didn't count on is some clown changing the rules at a whim without thinking it through

      • That Corona clown is stuffing a lot of people around. We have a system in place too, if our property is empty for a few months we can still hang on.

        If an investor (Property,Shares etc.) is leveraged to the hilt, they are just asking for trouble and should have stuck with a savings account. Just because the Bank approves a big amount doesn't mean it's affordable.

  • +3

    Feel for you unfortunately the law hates landlords at the best of times. In the current climate the government if basically saying landlords are going to fit the bill for a large number of people because the government has wasted its money on junk and mismanagement in the past

    This sadly it is the cost of doing business - the best thing to do is PAY NO BILLS for the property and make sure nothing gets fixed if you want to take it into your own hands cut the power and water to the property and refuse to send anyone out but you didnt hear that from me….

    I wont be voting for Scomo next election absolute dogs breakfast the way this has been handle

    • +2

      "the law hates landlords at the best of times" Good thing the government allows you to write so much money related to investment properties off on tax \ negative gearing huh.

      • +6

        Negative gearing is just the loss you make on the interest your paying to the bank you are still losing money as a landlord….. as your cash flow is outweighed by your outgoing cost of servicing the loan against the property….so the landlord is still losing money and banking on a long term capital gain which in this environment is unlikely….the difference is the landlord cant just decide not to f**k off and no pay anything and walk away he/she will be at a financial loss. Bad tenants get away with a lot at the expense of landlords in residential properties (commercial properties is a different story)

        If negative gearing didn't exist then i dare say very few people would have an investment property and rent would be 50% higher then what it is now….

      • You'd be pleased to know the government is already rewriting the basic taxation principals of investments for property owners, thanks to all the landlord haters in his ear: What other investment can't depreciate assets purchased 2nd hand?

        It might be reasonable to say we'd have to rollover losses until a gain is made on the property investment, rather than "negative gear" against other income… but then we'd be considered a business, not an investment, and we'd have to get our depreciation back.

        The haters idea that negative gearing "just shouldn't be allowed" is simply nonsense.

  • +3

    who would have thought investments come with risk?

    • +3

      Not property investors.

  • Rental insurance? Bond should cover the excess? So if you can't get them to pay the amount owing, use insurance?

    Feel for ya. This law is there to protect people from becoming homeless which I'm sure you can understand. Seems you have a prick tenant though. Hopefully your existing eviction will stand and not be countered by the new rule

    • Insurance May not cover a 'PANDEMIC' and usually it only covers 6-8 week after you pay excess you still losing a lot the bond is 4 weeks rent

      Chances are the tenant also hasn't looked after the property so OP is in a world of hurt

      This is sadly the landlord game I refuse to pay a rental property again because the risks are too great

      Next time buy land and sit on it

      • Been in the very same situation as the OP. Way too much protection for renters, not enough for landlords. Given we are doing the job for government in funding affordable housing.

        Can understand why landlords don't bother fixing things.

        It's all a horrible vicious cycle and the good landlords and tenants are the ones that suffer.

      • This is incorrect. Most policies will cover 26 - 52 weeks rent default.

        The excess is usually 4 weeks because you have the bond to rely on.

        • Not sure what your number comes from.
          Here is what I found norm
          https://www.rentcover.com.au/info-centre/coronavirus-faqs

          If my tenant loses their job due to the economic outlook (which stems from the Coronavirus) and stops paying rent, will I be able to recoup costs through my insurance?
          This would be treated as any other loss of rent claim and would be covered up to six weeks under rent default (as long as it meets the usual T&Cs of the policy). In this situation, the tenant has lost their job as a result of the economic impact of the Coronavirus. However, the reason for not paying rent is because they have lost their job. Therefore, the policy would respond.

          • @pilotyuan: EBM Rentcover is a Defined Events policy (a.k.a. rubbish cover). Terri Sheer is the same.

            All of our clients will be paid and our Full Accidental Damage policy costs less than EBM and Terri Sheer.

            As I always say, read the PDS.

  • -1

    Good thing the government didn’t abolish negative gearing. At least the pain is buffered.

    • Not just this year but every year they've had it (and are able to be negatively geared)!

    • +1

      Not buffered of the landlord don't earn any Money to pay tax to take advantage of it…

      I feel like people don't understand how negative hearing works….

    • +3

      It's the reason houses are unaffordable

  • +2

    Other things to think about before all of the tears we're seeing here about how terrible renters are and how poorly done owners are going to be getting it.

    Say OP got the tenant out, what happens if people are staying put where they can for now or cant afford to move and rent or wouldn't get approved so OP's property sits empty for 6 months anyway?
    Moving house costs money, money people might not be able to spend.
    Why do people think that the moment a place is empty there will be someone else move in straight away and your revenue stream continues? Plenty of places in Australia where rentals sit unoccupied for extended times.

    IF and its a big IF other tenants (not OPs example which seems suss and had repayment issues earlier on) are legit in a shit situation where they've lost all sources of income (plenty of people live in these affected industries), possibly are not entitled to any govt assistance (foreigners, even Kiwis, etc) what would you rather?
    Kick them out and risk not being able to have someone move in (if they're not ripping the place apart to sell the copper in the walls) or speak with them, be on the same page and then possibly have to cop reduced or lowered rate (ok lets even say 0) for the 6 months but know you've not just kicked people out to live on the street due to situations well out of their control which is going to impact millions in this country alone let alone the amount globally.

    The automatic assumption I've seen here is that if you're a renter you're a POS person only out to scam owners out of some money, yes there are those that will try it on, but even without these offers they're probably shit people.

  • +4

    It is soo easy to abuse these rules. Our work is going to be shutdown over easter for two weeks without pay. A contractor that I work with who is on at least $850 per day tells me that he is telling his landlord that he can't afford the rent. He was pisses that the rental agent asked him for proof. He goes and I kid you not "I want to see proof that the landlord can't afford to pay the bank".

    It is almost impossible that someone on $850 per day cant handle a two week shutdown. Jeez what are these people thinking? The sad thing is these people are getting away with it.

    • +3

      I think the onus will be on your friend not the landlord. And as far as I understand it tenants are still liable for whatever rent they owe at the end of this 6 month period. It’s not a free hotel for 6 months with no repercussions

    • Here is the thing… Not everyone have financial literacy. You might think that oh he owns twice as me, surely he must have saved enough to survive this. But reality is; people match their expenses with their income. Someone with 80k income getting a new job of 120k wont have the balance as their savings end of the year. Instead they’ve added more and more expenses by the end of year and they’ll be looking an even higher pay. Its a vicious cycle, but thats the reality of many.

    • +1

      How does that work, getting proof from the tenant or landlord?

  • +3

    Liberals just went full Labor
    That's not even true, they went beyond Greens or even Diji

    • Di Natale is even shaking his head

  • +7

    Ive got 2 investments and I rent for my own home because i cant afford Sydney. My tennants in Brisbane both lost their jobs last week and Im happy for them to stay and pay what they can. My other one the tennant has come out and siad he can only pay half rent now. What can i do? nothing.
    At the same time i received a notice from the real estate of the property i rent saying "We hope you are safe in these trying times. During this time, you are still required to pay your rent as per your lease agreement. The legislation has not changed on this."

    We have some limited savings to take some of the hurt but not to cover 6 months. I dont even know what is right, i guess im just going to have to try and claim land lord insurance on one, the couple are from Italy so not entitled to any benefits apart from accessing their paltry super balances. I feel for them as they cant exactly just go home right now, so im happy to let them feel comfortable and just do their best, but im essentially sponsoring them.

  • +2

    Honestly, it should have been left as is, without socializing the entire countries housing into public housing. Since they wanted to save on foreclosures, they gave mortgages a 6 month freeze. Now they need to do the same for tenants.

    The options govt has is:
    1. Pay the interest rate for all those landlords (and any loss in income). <— We pay for this.
    2. Remove the freeze on both (not gonna happen, since they already announced it).
    3. Bail out the banks even more. <— We pay for this.

    Our banks cannot cope with interests not being paid. They account for 25% of the stock market, which means they are heavily factored in super funds. If banks go under everyone is pretty much in a much worse place.

    Anything the govt will do, it will always be in the banks favor. They dont have an option anymore. Because they let credit be extended without a lot of checks and balances, banks are now extremely exposed.

    While landlords here are complaining they should not have to pay interest etc. Who else pays it then? Banks still need to pay the people they took the money from, to extend credit. Some of these are foreign sources (paid in USD).

    IMO the landlords right now should be much more concerned about the house prices when no one has any money and the foreclosures that will ensue. Watch the big short if this still doesnt make any sense to you. These tenants are your future home buyers. Without buyers, your house prices tank.

    Government just for the first time has started to allow companies to buy these junk mortgage bonds.

    Best of luck.

    • your right about house prices concerns but you fail to mention if housing supply drops the number of rentals drop thus demand of rentals increase and rent goes though the roof.

      Residential renters are not all bad bland I do feel for the good ones with shit land lords but the system is geared to look after the shit house tenants which sadly ruin it for everyone

      However property is a long term investment and long term it will go up

      • +1

        In the last 4 years (the real boom) 25%-30% was foreign buyers. Not sure how the supply drops … 5% of all houses in australia are foriegn owned. These numbers are just the people who bought it outright and does not include foreign buyers picking up stock via locally formed companies.

        Its not like we are running out of land any time soon. Land & House prices will fall, and so will then established houses.

        Source: https://www.abc.net.au/news/2017-12-07/anz-finds-foreign-buy...

        • Population of Australia is said to double in the next 10-15 years faster if we increase immigration and in take of refugees

          I can only comment on NSW and VIC but

          ~60% of the working population work within 30km of the CBD

          So you are correct we have a lot of land we don't have much land where the jobs are and unless you can work from home most people need to be near the CBD to get to work…

          States like Western Australia on the other hand I would agree with you work is spread out more thanks to mining and resources opposed to your standard white collar city workers

          Partly this is the state governments fault as public transport and roads in both state esp Victoria are dreadful

          Also your article is from 2017 we already had a dip on property prices which quickly turned around and saw a stark increase in price

          The key argument is we can't make more land there is only so much space in an suburb once it is solid you need yo move further out and further out and further…

          • +1

            @Trying2SaveABuck: Agree. I really dont know what the end game is here. At this rate, the govt is going to open up borders and start bringing in boat loads of people just in hope to keep the whole thing propped up. The increase in population is not natural, its highly dependent on immigration (which this govt made a bit more difficult) … We bring in 200k people into the country per year. So the demand and supply thing is all subjective.

            https://www.aph.gov.au/About_Parliament/Parliamentary_Depart...

        • "Land & House prices will fall, and so will then established house" Not if the govt and voters can help it, too much wealth to be lost by too many people.
          I don't see it happening in my lifetime. The fact that people are basing so much of their investment in property to make their fortune also indicates otherwise.

  • +1

    Also are you sure he's alive?

  • +1

    It's an investment and there are risks. The reason why house prices are inflated is because people see housing as a low risk investment that you can make money on. Now guess what? Your risk calculations have been wrong. Our tax dollars or policies should NOT go to safeguarding investments because you took on the risk by choice. There is no such thing as risk free investment. If you can't handle it sell and take it as a lesson learnt.

    Let me be clear - houses are a NECESSITY FOR ALL, and your choice to invest is no where near as important to society. People will be guaranteed a place to live (and some will abuse this) and our country should learn that owning a residential home is not a valid income source.

    • +1

      The turn to make housing a luxury item has been pushed by all the crap home improvement and flip it shows for the last 15 years, then people get made and down vote you when you tell it how it is. shame.

    • Mate, if the landlord sells then the tenant is even worse off. Food is also a necessity for all but you wouldn't go and take it for free from the supermarket.

      • +3

        Tenants are much better off actually. If landlords have to sell an overpriced unservicable asset, then it reduces the market price, thus reducing rents and mortgages, etc. We're living in a bubble, mate.

      • +2

        You've missed his point.
        "Our tax dollars or policies should NOT go to safeguarding investments because you took on the risk by choice"

        This isn't the same as people going and taking food from supermarkets expecting not to pay for it. There are also places setup to help with people who cant pay for food.
        I'm yet to hear a single legit case where anyone renting is suddenly living for free on this Corona related change, most are in centerlink lines or freaking out trying to get another job, its just arsehole people taking the piss and people here blowing this up out or proportion.
        Our RE has also emailed us making it very clear what was announced does not mean you get 6 months "free rent" or any such lie that people seem to be propagating.

  • Do you have Landlord Insurance? If so, the Rent Default section will kick in, but check your PDS as to when.

  • +4

    The problem is this. Everyone needs to take a loss right now. Those that can least afford to are typically renters and people without jobs. The banks should be taking the biggest hit for the country as they are at the top of the tree with regards to mortgages and renting. But just like usual, the vast majority are doing the right thing, but the leeches and scum are trying to take advantage of it. There will be renters using this to their advantage, but there will be just as many trying to screw people over for money too, like the toilet paper resellers and probably a few landlords as well. If you look on the practical side, if you have a good tenant, then you probably want to keep them. If tenants get evicted because they have no jobs, you won't find a replacement now anyway. Everyone who has no place to live can't afford rent. So landlords/government really need to be pushing banks and the government themselves to put a freeze on things like rates and mortgage repayments if the tenant isn't paying rent. Everyone needs to chip in to make this work and yes its unfair on landlords if those charging them are also not playing the game fairly. So IMO if a landlords tenants, cannot afford rent, the government needs to waive taxes for the 6 months and the bank needs to freeze the mortgage, not repayments and no interest. Just put it on hold.

  • +1

    i dont know if it has been stated here (3 pages worth of posts) but at the end of the 6 months all 6 months of rent are due!
    as a landlord i will have no issue if my tenants ask for a reduction or a pause, but then comes the issue of how do i then afford to cover that mortgage?

    • +3

      How would you cover that mortgage if the property had no tenant and sat empty for 6+ months?

      • it just wouldnt sit empty, even in this climate, there are plenty of tenants out there look for a place

        • +1

          Until all these people suddenly don't have an income, i'd be surprised if people would be looking to move right now unless they really have to.
          The point was that plenty of wanna be investors take these risks and the slightest of upsets like a few months or so without rental income can possibly sink them or cause them financial grief.
          Risk Vs Reward, nowhere else would people be sympathetic to anyone who's risked it all for an investment and might end up loosing it due to their inability (intentional or not) to service the debt.

          • @91rs: So you're saying that the tenants should be evicted and the property left empty for 6 months?

        • 30-50% increase in rental properties countrywide this month because of ex-AirBnB properties flooding it. So yeah, it'll be sitting empty for a while.

    • +2

      Good luck getting 6 months rent out of a tenant that wasn't paying on time to begin with.

    • Basically you expect someone pay you double rent for next 6 months, something they could not afford before and would not be able afford after.

  • +3

    there's nothing in this thread about the landlord possibly losing their job, needing the rental income from the tenant to afford their mortgage + expenses. landlord's bank doesn't give landlord a break and then becomes blacklisted, losing credit score etc.

    definitely not the whole picture being spoken about, a lot more than renters are affected

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