Tenant Stopped Paying Rent

Trops on 30/03/2020 - 22:02
Last edited 01/04/2020 - 15:41

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.

Home & Garden

Comments

    • Levathian on 01/04/2020 - 11:47

      That's our issue too. Lost income because business sales are crashing. Was counting on commercial rent from (old) premises, but that tenant is now using Scummo's announcement as a reason not to pay any rent! It's not like the bank will just waive months worth of payments and interest either.

      • Levathian on 01/04/2020 - 13:56

        Can I add to the downvoters that the tenants business has actually NOT been affected by coronavirus at all, they're just using it as a reason not to pay rent, therefore it shouldn't be up to landlords to fund the rent of tenants who don't want to pay it?

        • 91rs on 02/04/2020 - 13:18

          Of course, it should only happen or be negotiated where there is proof of impact to the business, standing down staff, reduced hours of operation or closure which ca be shown in loss of income and then ability to pay.

      • dbun1 on 03/04/2020 - 07:11

        I know the framework around the announcement has yet to be fully laid out, but my understanding from the REAs that I deal with is that any tenants have to go through the proper process to demonstrate hardship. Having said that, Scomo’s method of “have a chat” would probably cause a lot of confusion that there is no process to follow.
        They can’t just stop paying rent because of the announcement with no justification or proof of hardship.

  • echizen on 01/04/2020 - 10:44

    Its called having an inept Prime Minister out to buy votes and not doing what is necessary to fix the problem. Interestingly, our PM's background is an accountant…. pretty pathetic that he's just soo bad at economics and figures…. go figure.

    • Baysew on 01/04/2020 - 11:08
      +6

      PM's background is an accountant

      So where the bloody hell are you did you get that idea? It's Scotty from Marketing

  • echizen on 01/04/2020 - 10:47
    +1

    Lets face it, all the government cares about is the lowest common denominator. Those who flaunt and abuse the system. Its always the poor middle class who's trying to get ahead that gets screwed over.

    • Ghost47 on 01/04/2020 - 11:44
      +4

      Wouldn't you say the government also cares about the top end of town? It's like the middle class is the forgotten middle child.

  • coolsteps on 01/04/2020 - 11:02
    +1

    anyone know if landlords ask for a loan repayment break for 6 months will that affect their credit if banks make a credit entry on your credit file? does it depend on the bank? i know deferred interest will be capitalised so is it better to change from P&I to interest only if you can afford it?

    • Jumpup on 01/04/2020 - 14:26

      I don’t think it would affect your credit file.
      Leave it at PI as the interest rate is lower than IO.

  • Levathian on 01/04/2020 - 11:43
    +4

    I feel you buddy. Parents have a shit commercial tenant who is now refusing to pay rent (even stuff that was due before the shutdowns!!) and there's nothing we can do. They are even gloating about how many extra sales they are making on social media so we've got proof. It's absolutely ludicrous that the nation's housing stock is now full of squatters.

    • Some Guy on 01/04/2020 - 16:17
      +5

      There is plenty you can do. Get Smithers to relaease the hounds, ie send a legal letter of demand. Ask them to put forward in writing their case for ceasing rent payments. That is, they must demonstrate that they are in severe financial distress as a result of the coronavirus. Even then they must pay what they can, by agreement. Facebook screenshots indicating otherwise ought help your case in the case of BS from them.

      It has already been highlighted that those not in financial distress related to coronavirus are expected to honour contractual agreements and enforcement in the usual ways will be allowed. More meat will be added to the bone in the coming days that will remove the "Woohoo, free rent for 6 months" attitude.

      • Levathian on 02/04/2020 - 12:52
        +1

        We did ask for proof and they refused and just said 'it should be obvious to you why'.

        I'm hoping the government adds some guidelines to this 'eviction morotorium' rule they have to prevent this behaviour.

    • dbun1 on 03/04/2020 - 07:17

      Whilst Scomo has made the announcement, the actual ruling around how it applies has yet to be defined.
      Most official websites are still saying to follow the current process for hardship until further details on the new policy is defined.

      As usual, the policy was made to protect those in hardship and is now being abused by others.

      All you can do for now is track the rent in arrears and wait for the policy to be defined. Once it can be shown that they are playing outside the rules I.e. have not properly demonstrated financial hardship, send the debt collectors.

    • jakeau on 03/04/2020 - 10:40

      Levathian, suggest you remind them on their social media posts that they are in arrears.

  • Keplaffintech on 01/04/2020 - 17:59
    +8

    My Qantas shares have stopped paying dividends! What can I do?!

    • 91rs on 01/04/2020 - 18:06
      +11

      My bitcoins not worth as much, can I get some sympathy and maybe govt assistance with that?

      • cheng2008 on 02/04/2020 - 17:51
        +1

        Yes, as soon as you send through a copy of your trade history for CGT purposes ;)

    • Levathian on 02/04/2020 - 12:54
      +1

      It's not costing you any money to have those shares though (apart from opportunity cost). Many landlords have costs associated with their property so the rent collected isn't 100% profit, therefore it's not as simple as 'waiving rent obligations'.

      • parsimonious one on 03/04/2020 - 14:07
        +3

        Not true. Many people borrow to invest in shares etc.

        Any investor has to accept risks as part of the investment (even unforeseen “black swan” events).

        Landlords are no different (except residential landlords are exploiting a necessary commodity ie housing in order to turn a buck)

        • Levathian on 03/04/2020 - 17:33
          +2

          No, the shares have no obligation to increase in value, neither does a property.

          If you are a renter you are obligated to pay your landlord your monthly rent. That's how it works. I don't see why they should suffer the burden of funding community/affordable housing—that's the government's problem. Therefore unless they break the lease or the tenant asks for rent relief (with valid reason), the landlord should expect that income to continue.

          • parsimonious one on 03/04/2020 - 21:38
            +2

            @Levathian: sigh surely you realise that investment returns can comprise a variety of elements. Capital growth is one, income generation (ie dividends or rent) may be another.

            Another clue for you may be in the name “investment property”… it’s an investment. Investments, in return for the possible benefits have varying degrees of risk. If one wants to invest one must be prepared to accept those risks.

            Did they not teach that at “little landlord school”?

      • bman20 on 03/04/2020 - 17:13
        +1

        You are the one that has decided to take on an enormous amount of debt. It is no different to taking out a margin loan for the purchase of shares.

        These are crazy and tough times for all. Being leveraged to the hilt with an investment property is no different to doing so with any other asset class.

        Not receiving rent for extended periods of time is a risk all property owners should be prepared for. The reason the property market has blown up is because too many people are buying property who aren't in a position to buy property.

        • Levathian on 03/04/2020 - 17:31
          +1

          It's not our problem to sacrifice our equity for tenants who decide they don't want to pay rent though. Unless they have extenuating circumstances they are 100% liable for their payment obligations. It's part of the course of having a contract.

          • bman20 on 03/04/2020 - 18:03
            +3

            @Levathian: The only thing you have said that is correct is that they are 100% liable for the payment obligations. No one has disputed this.

            The fact one is liable for the payment obligations does not mean that you will actually be paid, it simply means you have recourse to pursue them for owed monies.

            The fact is, a tenant not paying their rent is a very real risk and isn't even unlikely over an extended period of time. The only risk free asset is cash and you pay to hold cash instead of earning a return. You take out a highly levered investment and you need to understand that it can go entirely tits up, no matter how safe you think it is.

            The tenant is not responsible for preserving the equity in your property, that is entirely seperate to their obligation and is your problem.

            This is a problem that sucks for all involed. The solution here is simple - OP needs to freeze their mortgage repayments until this is over and evict the tenant. They then need to chase the tenant for monies owed. The owner, who has invested in a highly levered asset, needs to wear the cost of the accrued interest. This is part of the risk you take.

            • Levathian on 03/04/2020 - 18:05
              -2

              @bman20: If the government caused the tenant to loose their income, then they should cover the extra interest payment.

              • 91rs on 03/04/2020 - 21:17

                @Levathian: Lets just get all the LL's to send the bill's for interest and loss to China.

                • Levathian on 04/04/2020 - 08:32

                  @91rs: Even better.

                  China should pay compensation to the world actually but that's offtopic.

            • [Deactivated] on 04/04/2020 - 00:07

              @bman20: Let me see. You want someone who lost job say for 6 months and could not pay rent during that time pay you double rent for next 6 month if they find the job? Remind me why weren't they paying double rent before? Oh right, they could not afford it.

    • jakeau on 03/04/2020 - 10:42
      +2

      Did they sign a contract when you brought agreeing to pay a dividend?

  • Typical16-bitEnjoyer on 01/04/2020 - 19:03
    -1

    I've pulled out the world's smallest violin and I'm playing a tune just for all you poor landlords suffering during this pandemic.

    • ozBFM on 02/04/2020 - 01:05

      I may join you reading all these comments.

    • StonedWizard on 03/04/2020 - 18:16
      +1

      @Zeggie - People should learn within their means and build up savings.
      This applies to tenants and landlords.

      Remarkable how people start asking for a hand out, after being unemployed for 1 - 2 weeks.

      Always try and prepare for the worst, no matter which side of the fence you’re on. As a renter, you should make sure you have enough savings in case you lose your job or get sick.
      As a landlord you need to do the same, since tenants may stop paying rent.

  • LFO on 01/04/2020 - 19:36
    +4

    Casually chatting with a lovely senior lady about this topic.

    She reminded me that in Sydney, during the WWII, rents were frozen and evictions as well.

    She couldn't quite remember for how long was that but went instead into a digression that exactly the same (similar?) situation (frozen rents) happened in the USA during "the past" (depression I guess??).

    So, my point is that THIS EVENT IS NOT UNCOMMON nor UNHEARD OF.

    Leasing property involves risks, lots of risks.
    It works when/if those risks don't materialize. But it is great to be aware of them.

    • Falbium on 02/04/2020 - 05:15
      +4

      "Frozen" usually means the price doesn't go up, it doesn't mean you don't have to pay. They've frozen some utility bills here in WA, I still have to pay them, I just know the price won't rise.

  • Ghost47 on 01/04/2020 - 20:04
    +2

    How about you suggest to your tenants that you revert back to serfdom for the time being? That way they don't pay rent, and you get a free slave. Win win.

    • Typical16-bitEnjoyer on 02/04/2020 - 09:26
      +4

      Spot on. Landlords would love to return to Feudalism if they could. Free labour and/or income!

  • WhoGiveAShxt on 01/04/2020 - 22:21

    I understand you try to be nice and be a good landlord. But this is the last priority in doing business or investment.

    There are so many red flags according to your description. Late payments, non-responsive for a long period of time and a brunch of excuses why you should accept late rents even no rents. Business is business, if you don't follow the business rules, you got punishments. In this case, The business rules is defined in a document called Rental leases.

    You RE//PM also did not delivered the result, and let a four-week-top matter developed into 8-week mess.

    Being nice in your case sucks, and sucks big in the current environment. Anyway, I wish you a lot of luck because you need them now

  • Odin on 02/04/2020 - 00:37
    +8

    This is why the Australian obsession with property is so (profanity) stupid.

    People need places to live during these times, too (profanity) bad if you're having problems with a tenant.

    If we had not got into this mess by encouraging amateur speculation throughout the property market and kept prices sensible a lot more renters would own and this wouldn't be such a big issue.

    • 91rs on 02/04/2020 - 10:36
      +2

      If we also had a lot less foreign investment that'd make things a hell of a lot better, but there is money in selling out to our Chinese masters.

    • cheng2008 on 02/04/2020 - 17:39
      +1

      This has nothing to do with OP though, if the renter is always late with payments/missing payments what possibility is there of him maintaining a mortgage even if apartments were only $100K? Renters like the ones OP describes would not own property regardless of price so I think you're talking about a different issue.

      People need places to live during these times, too (profanity) bad if you're having problems with a tenant.

      Sure, people need a place to live, they can discuss with the landlord if they've run into hardship. I don't see how that turns into "too **** bad" if they refuse to discuss whatsoever.

  • screensaver on 02/04/2020 - 00:51
    +2

    Well my landlord is doing okay, 20 years ago when I moved in the house was worth around 200k. now it would be 800k so he has made over 500000 plus the rent I paid in that 20 years over 200k but I fully intend to pay my rent

    • mrvaluepack on 02/04/2020 - 08:04

      But has he got that 500k? He hasnt. Only when landlords/investors crystalize their profits/loss, then they reap the benefits. Otherwise its nothing more but just on paper.

      • 91rs on 02/04/2020 - 10:35
        +1

        But can the owner borrow against that perceived 800k value? Yes, especially if its well and truly paid off by now. Not based off the original 200k value.

        • cheng2008 on 02/04/2020 - 17:34

          And? He still has to pay it back with interest. Borrowing is not free money.

          • Chang1992 on 03/04/2020 - 13:18

            @cheng2008: Usually, when they borrow against the 800K on investment properties, the rental incomes covers the majority of the repayments. If they made a wise financial decision.

    • dbun1 on 03/04/2020 - 07:20
      +1

      Not quite - only when we sells he can materialise the gain. For now it’s just a paper-gain.
      It’s not like that increase in value on paper magically pays the bills and means more money flowing in each month.

  • OzCheapo on 02/04/2020 - 02:16
    +7

    I'd do everything to kick the scumbag out. Sounds like OP has been reasonable provided there is communication. Tenant is looking to take advantage of the situation.

    • Levathian on 02/04/2020 - 12:57
      +3

      Yep. Is it actually better to have a non paying tenant VS an empty property? I think I'd prefer the empty property.

      • OzCheapo on 02/04/2020 - 13:27

        Less damage, plus you might be able to claim on loss payments from the insurer.

        Disclosure, I am not in insurance, so someone from the industry might be able to chime in here.

  • meoden1005 on 03/04/2020 - 07:07

    Can you let the tenants rack up the debts and claim landlords insurance? I bought landlord insurance and the terms look like cover it. Mr PM just confused lots people and make them believe you can get free rent for 6 months.

    • dbun1 on 03/04/2020 - 07:23

      Landlord insurance only covers so many weeks, generally 4-6 weeks, so the rest of the 6 month period has to be buffered by the landlord. The policies generally assume you will evict so only need to cover a small period of non-payment until you find new tenants.
      Maybe some policies have much longer periods of cover?

  • jaballa on 03/04/2020 - 10:24
    +1

    I am in the exact same situation as the OP however I am in NSW. Tenant stopped paying rent end of January. Went to NCAT and got notice to pay but he never paid and is still living there.

    I received the warrant for eviction yesterday however the sheriffs office in Sydney has suspended all evictions until further notice. The sheriffs office said it doesn’t matter if it was before the moratorium or not related to corona they are all currently suspended. The moratorium totally screwed me over.

    • pegasusx on 03/04/2020 - 11:10
      +1

      I think this is a perfect example of a good intentions policy with no framework. "working it out" isnt working out and it seems at the moment landlords are the collateral damage.

      • Levathian on 03/04/2020 - 13:16
        +2

        'Talking and working it out' only works when you have a reasonable landlord and honest tenant who are able to work together.

        99% of the time you either have a greedy landlord and/or a scammy tenant. And this law totally (profanity) over landlords by making it impossible to evict a tenant.
        They better strengthen the rental debt collection laws too.

        • Hangryuman on 04/04/2020 - 14:33
          +2

          '99% of the time you either have a greedy landlord and/or a scammy tenant'

          and - 87% of statistics are made up on the spot.

  • Levathian on 03/04/2020 - 17:35

    Good to see some new laws might be coming out to address this. Private homes should not become de facto socialised affordable housing.

    • parsimonious one on 03/04/2020 - 23:09

      As bman20 said above, go chase the tenant for the rent they owe…

      Hell, it’s not your problem they lost their job/ source of income.

      Evict them, put them on the street where they belong.

      They have a lease and you demand to be paid.

      How dare they lose their job and inconvenience you. They signed a sacred covenant (aka a lease) damn it.

      They occupy your property… your birthright, Nay your legacy.

      Take ‘em to court. Take it all the way. Squeeze that stone til to you get blood out.

      God speed, I’m with you… for you are a landlord. The most special and noblest of humanity.

      • Levathian on 04/04/2020 - 06:22

        This is a commercial tenant who is still making an income but is using covid as an excuse not to pay anything. Keep up.

        I don't think residental landlords should kick out people from their homes, no.

  • OzzyBrak on 03/04/2020 - 22:44
    +2

    people who invest in shares are down 20% or so, all investment carries risk even real property. Just because we had such a long run of good-times doesn't mean that you won't lose money now. The value of your property will likely fall, the rental estimate will fall, the likelihood of being paid rent on time and in full will fall. It's just part of the cycle, you took on risk for financial rewards and this is that risk showing it's face. strap in and hold on and see where we end up.

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