Advice on Using a Debt Collector for $5k Owing by Ex-Tenant

Cacao on 20/07/2023 - 08:45
Last edited 20/07/2023 - 10:01 by 1 other user

Hello, we have an investment in Brisbane managed by a real estate agent.

Last year we had to kick a tenant out who stopped paying rent. Long story short police had to get involved and he left a big mess behind. After he left we found out that he had someone else with a kid living with him. He had a partner on the lease for a while but the last year of the lease was supposed to be just him. He had a dog.

Unfortunately he left us a hefty bill of nearly $5000 to clean up his mess and the rent he owes us and this is on top of the bond. This was decided in the magistrate’s court.

We have been looking into how we can recover the money. Have spoken to several local debt collectors and it looks like we’d almost lose half the money going down this route. Another option is civil litigation. I have spoken to a lawyer but to get proper advice we’ll need to pay consultation fees. Apparently we can pass on all/some of the legal fees eventually.

I am just looking for some advice from people who have been through something similar.

Thanks for reading

PS:
The tenant lived at the property for 3 years and against advice from our real estate we never raised the rent by a cent. We now know that the tenant had stopped working and was on government pension (military).

Financial Investment

Comments

      • SlickMick on 21/07/2023 - 08:25
        +3

        I'm amazed by the attitude here that a tax deduction makes any expenditure justifiable.

        • freefall101 on 21/07/2023 - 11:01
          +1

          Having worked as a tax accountant, it boggles my mind. No one is on this site saying “charge less rent, you’ll pay less tax!”

  • try2bhelpful on 20/07/2023 - 11:21
    +4

    Unfortunately you are unlikely to get the money back. Was the real estate agency conducting regular checks on the property? Also a good warning for people to check what is covered in their landlord insurance.

    You do have my sympathy on this.

  • resisting the urge on 20/07/2023 - 12:00
    +1

    I wouldn't engage a debt collector.

    They will:
    - take all your data and share it
    - ask you for money at every opportunity (this is their core competency, after all)
    - harass the debtor, and cost the courts time and effort that should be spent on more important things, or not spent at all
    - ensure the poorest possible outcome for all involved.

    Novel ways to follow it up with the debtor regularly (automating messages at increasing cadences), and occasionally sending them a message which tells them there is a human at the other end that hasn't forgotten. Use humour if you get zero response, and/or employ a long-term strategy to firmly reinforce in their mind that the outstanding debt is still payable, no matter how long the leave it, and show how it will ratchet with collection fees and interest. A growing debt, along with the potential for a category one report to a credit agency could eventually tip them, assuming they get more responsible with age.

    • Typical16-bitEnjoyer on 20/07/2023 - 12:11
      +1

      Besides most of your post being incorrect, the key thing I took from it is you've never heard of statute barred debt or of someone changing their phone number.

      • resisting the urge on 20/07/2023 - 13:39

        Indeed, a phone number is one attribute you might need.

        Certainly any applicable state/federal statutes need to be respected. Any strategy needs to include methods to deal with it, which is all in the playbook of a debt collector.

        For the collection of 'small sums', these are really things that a landlord really needs to learn, and have practices in place so they can manage tenants that don't pay.

        • Typical16-bitEnjoyer on 20/07/2023 - 13:44
          -1

          Certainly any applicable state/federal statutes need to be respected.

          May as well delete the second half of your post then.

          • resisting the urge on 20/07/2023 - 13:51

            @Typical16-bitEnjoyer: The strategy just has to include this, as it does other externals. Agreed at some point it may be necessary to put up or shut up; that is goto Court to establish the debt within the relevant statutory period/s- or just give up, and call the bikies!

  • GoldenDragon888 on 20/07/2023 - 12:54
    +3

    Lost income won’t be a deduction. Only expenses related to income received.

  • Drpepper666 on 20/07/2023 - 13:51
    +1

    Rentoids have no respect for other people's property. Thankfully my air bnb guests are usually pretty good. If they don't follow my cleaning requests it's pretty easy to add on extra fee. 👍

    • Gdsamp on 20/07/2023 - 14:20
      +2

      landchad moment

      • Protractor on 20/07/2023 - 14:59
        +2

        Imported classist ' everyone else is an untouchable' attitudes have permeated the drinking water in this country.
        Ironically the rich are just getting lazier. I thought they were static to begin with, but the 'pig' economy has shown their true colours.

        What goes around comes around though.
        I like that all landlords can see into the lives and circumstances of everyone else's tenants.Being a lord is certainly a cult of entitlement

  • ihbh on 20/07/2023 - 15:47
    +1

    Let it go.

    You don't want to waste any more financial and emotional capital on this one. Sh*t happens. The next tenant is most likely a good tenant.

  • TheBilly on 20/07/2023 - 16:03
    +4

    The way I look at is, you've already lost the $5k. So any additional money spent recovering $5k will be on top of that. The odds are not stacked in your favour, so the question is are you willing to loose more money for the chance to recover the $5k already lost. I.e. are you willing to invest another $5k to recover $5k.

    Unfortunately while the system will work to a degree, I think if the guy had money he would have just been paying his rent so even a successful ruling in your favour would mean that he will have to pay you with money that he doesn't even have.

    Unfortunately sometimes you just have to cut your losses. At least you made back a portion of it in tax deductions.

    • Geoffreys on 21/07/2023 - 07:47
      +3

      The beauty of a debt collector is the satisfaction of knowing he will be harassed long after you have given up hope of recovering dollars.

      The stress a good debt collector can create is significant.

  • Gunnar on 20/07/2023 - 18:42

    It’s a crappy situation for you, especially on principle.

    I’d probably let it go. Knowing that you’ll lose half of your $5k on the debt collector, is all the hassle you have to go through really worth the $2.5k you’ll gain?

  • Geoffreys on 21/07/2023 - 07:46

    Persue him through QCAT and/or small claims court. It’s no cost to you and likely to get about a similar outcome as debt collector. All parties represent themselves at QCAT arbitration. You would be surprised how effective being served documentation can be.

    It’s not the amount of loss but the principal of it, plus the likelihood he will do it to someone else.

    Alternatively if you are happy to get a portion of the debt back in return for making his life difficult then debt collector is not a bad option.

  • 82norm on 21/07/2023 - 08:12

    Once the court ruled in your favour, did you seek a letter of demand and then go to the sheriffs? If they re on a pension you can still take a garnishee order on any accounts they have. Reality is, the tenant sounds like scum and the likelihood of succeeding is low. That said, the court ruling is good from memory for I think 7 years, so even if he has no money now, you never know what may happen later on eg, get an inheritance, win lotto, buys a car….could easily have that seized.

  • echelon6 on 21/07/2023 - 09:24
    +9

    Small claims court - DIY - just pay filing fee, it's around $100. You will win easily, he probably won't even show up. The hard part is enforcing the judgment - likely best route is garnish his bank accounts which means get a court order (free, DIY) to serve onto each of the big 4 banks, compelling them to find any accounts in this guy's name, then they take the money out and give it to you.

  • footscrayvic on 21/07/2023 - 13:32

    Im no expert on rental properties, as I got rid of my rental property some years ago because I found them more trouble than they are worth. But if the suggestions mentioned above don't work out the I would sell the debt to to a collector, claim the residual loss on tax, and move on. I'd probably ditch the property and put the money into super and ETFs. Far less work and stress.

  • cheapaschips on 21/07/2023 - 18:07

    I can see quote a few debt collecters with "no commision no charge." advertised (just google)

    Unsure how accurate that is but if true I would go down this route.

    Some recovery of money is better than none and potentially losing more.

  • Mart Mart on 21/07/2023 - 18:09

    Let it go under the circumstances, unless you want this person to continue to live rent free inside your head!

    It's just a cost of doing business and largely tax deductible… obviously this person has had a rough time for whatever reason and won't respond well to debt collection, you're just throwing good money after bad…

  • rave75 on 21/07/2023 - 18:46
    +10

    Did the magistrate imposed Judgement? Or they just ruled that tenant owes you $k?

    This is the procedure that I did to claim money back in NSW

    1. Serve letter of demand (need to know their current address), I used a 3rd party to serve legal doc, cost like $100

    2. After certain time period and no reply, I served letter of Judgement to the party + lodge it in small claims court.

    3. After obtaining Court Judgment (judgement messes up your credit rating), I tried to obtain garnish order. You need to know which bank they are with. I managed to garnish 3k. of their bank acc when the debt was 5k. I suppose they might have other bank acc but for every bank, I need to do the garnish order again. I was satisfied with $3K + judgement on their credit file.

    • Munnie on 22/07/2023 - 00:24
      +2

      I thought garnishee would be the best way to recoup money since OP knows they’re on social welfare… maybe they can just garnish Centrelink when there is a judgement debt instead of each individual bank

      • rave75 on 22/07/2023 - 16:38

        Yeah, you can garnish bank acc, wages, and centrelink payment as well.

    • Cacao on 23/07/2023 - 23:15

      Ty. This is helpful.
      I will look into it.

  • Weezle on 21/07/2023 - 19:04
    +2

    Landlord insurance?

  • belongsinforums on 21/07/2023 - 19:12
    +1

    (profanity) his ex partner

  • wtfnodeal on 21/07/2023 - 19:47
    +4

    If you are thinking to do the right thing or our community a favour such as making the ex tenant declared bankruptcy or to prevent the next unlucky landlord gets into the same situation as you are in now then do it! Just don’t expect seeing any money coming back your way.

  • liongalahad on 21/07/2023 - 19:58
    -5

    I'm just gobsmacked noone said it yet so I'll say it. I'm excited. OMG. Here we go…..

    Bikies.

  • MakkhiChoos on 21/07/2023 - 22:27
    -6

    Bond needs to be 3-5% of cost of property and only released after Landlords approval. Else there is no deterrent.

    • filmer on 21/07/2023 - 22:55
      +2

      5% of the property is a chunk of way to a deposit that scumlords will try to stop you from getting back if you do try to purchase, and won't be usable as a deposit if you do either.

      • MakkhiChoos on 21/07/2023 - 23:05
        -1

        Better and swift protection from scumters would be an alternative but I don’t see that happening. The structure and laws, or lack of them are severely in favour of them.

    • No ONE on 21/07/2023 - 23:23
      +3

      So 3% of a $1m property is $30k. Are you drinking piss?

  • FlyingMiffy on 22/07/2023 - 10:19

    Listen to Elsa mate. You've done what you could. The tenant wont be thinking about you, so dont bother thinking about them. Claim it as a tax deduction. Move on.

  • Herbse on 22/07/2023 - 11:36

    I guarantee you they won't care about any debt collectors and you'll just be adding onto your costs

    Absorb the cost, tax deduct it and charge it to the tax payers like everyone else and move on

    • gromit on 22/07/2023 - 23:24

      I would personally go the debt collector route just out of spite and the satisfaction of knowing they will be hounded for years and have the black marks on their financial history.

      • Herbse on 23/07/2023 - 13:30
        +1

        I've lived with and dealt with these kind of people. They give zero (profanity) about being hounded or their financial history, which is more than likely already (profanity).

        They simply ignore calls know that every action trying to get money from them is costing the other side. This continues until the collection side gives up.

        • gromit on 24/07/2023 - 08:16
          +2

          sometimes it isn't so much about whether they care, it is about your own sense of well being. I got screwed out of 10k about 20 years ago (it was a good lesson in life), I wish I had sold the debt to a debt collector or spent a couple of hundred on getting them to chase it, would have given me less sleepless nights and frustration as knowing they had screwed me with zero consequences was hard to get over.

  • Misha Bakunin on 22/07/2023 - 12:40

    Write it off and save yourself a massive headache. All investments have risk, you are fooling yourself if you think property is an exception. I've lost about 100k in the last 2 years from the peak of my gains in the market (mind you i am actually still a bit up from my 20k initial investment, so I'm still up).

    Do you see me crying on a forum? No. Accept the risk of investing, move on, and grow up.

    • Cacao on 23/07/2023 - 23:25
      +1

      That doesn’t make sense. What you are talking about is capital gain/loss.. property market also goes up and down which is a risk I have accepted. Risk of the tenant being a scum is there but there is lawful way to retrieve the debt owed

      • Misha Bakunin on 24/07/2023 - 09:25

        Maybe I worded that harshly btw…

        Basically I'm just saying all investments have risks, look at the bigger picture over years, let this one go, it is not worth the stress, it's about the investment, things like that will sometimes happen, don't take it so personally.

        Given you have an investment property, 5k is not that much to worry this much about.

        Don't let revenge get in your head, think coldy, it's just an investment.

        I say this, clearly, because it seems unlikely you will get the money back, law or otherwise.

  • Marcsie on 22/07/2023 - 17:10

    Landlord insurance with tenant protection will pays you the rental loss

    • Cacao on 23/07/2023 - 23:29

      Our policy didn’t cover it at the time. Having said that current policy covers us for rent defaults but theres a $1k excess then they take out the bond then they hit you with a heavy increase the following year!

      • YesPleaseThankYou on 24/07/2023 - 17:21
        +1

        Still incomplete information but I'm going to take a guess at what happened.

        During COVID-19, state and territory governments provided all sorts of opportunities for renters to apply for rent reductions etc. As a consequence, the insurance industry reacted by removing loss of rent cover from new landlord protection insurance policies. (Existing policies were unaffected). Slowly, insurers have started to re-add loss of rent in the list of covered items for new policies.

        My guess is that the OP either did not select cover for loss of rent or it was not available to them. The OP does not reveal what the precise circumstance was.

        Also, a claim does not necessarily result in 'a heavy increase [in premium in] the following year'.

        • Cacao on 25/07/2023 - 00:30

          Rent default wasn’t covered under our policy at the time. Why does it matter?

  • Ahan on 23/07/2023 - 09:30
    +2

    I work in insolvency and therefore have good experience with debt collection.

    I would not pay anything upfront to a debt collector. Try increase their commission personage to say 40 or even 50% instead of paying upfront.

    Because if the debtor does not cooperate, there is very limited things a debt collector can do (other than recording a default on credit report?)

    Can't even threaten to bankrupt the person because the amount is lower than the minimum required to bankrupt.

  • GrimCheaper on 23/07/2023 - 11:59
    +1

    Cut your losses and focus that energy on something more productive. I doubt you will see any substantial money.

    The stress you are going to put yourself through which will just bring you down more.

    Don't make business a personal issue. I get that you are fighting for your principals, but this is a situation that would be healthier for you just to walk away from.

  • YesPleaseThankYou on 23/07/2023 - 13:31
    +1

    The OP has recently been active but has not posted further.

    There's a lot of information we don't know about this story.

  • Eeples on 23/07/2023 - 21:32

    OP thank you for your service.

  • Geryatric on 24/07/2023 - 00:47
    +1

    Not worth chasing.

  • MITM on 24/07/2023 - 17:24

    Interested to know if you are going to persevere with Property Investing or are you going to quit ?
    You never increased the rent. Kindness is often mistaken for weakness. There is a lot of emotion in your replies - emotion doesn't work well when investing.
    There is a lot of "human" factor in real estate, yet the average annual ROI is similar to the stock market. Just my observations.

    • Cacao on 25/07/2023 - 00:45
      +1

      We are not planning to sell at this stage. This has been the only negative experience so far and for that we feel very fortunate.
      My partner and I were renting for a long time so we know what its like. Through covid when interest rates were super low it felt wrong to increase rent. Oh well.
      As someone said its cost of doing business and luckily not a huge amount in the scheme of things.

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