Dealing With a Renter In Arrears

Rental providers often depend on the rental income they receive to cover the costs of their investment properties. Balancing mortgage repayments, insurance, management fees and utility service fees, any delay in receiving the money owed can result in a severe inconvenience.

If you have a renter not paying their rent, you might believe it to be a simple matter of terminating their lease agreement and evicting them from the property, making room for a more reliable candidate. In reality, the law traditionally favours the renter in scenarios relating to rental default, given the range of personal issues that may cause it. As such, rental providers must act according to their obligations and follow due process to see a favourable resolution.

In this article, our experts at Dynamic Residential explore everything you need to know when dealing with rental arrears.

What Does Rental Arrears Mean?

Rental arrears arise when a renter fails to meet their financial repayment obligations in paying their rent by the agreed due date.  Naturally, there can be many reasons why someone might fall behind on their rental payments, such as losing their job or proving unable to work, lowering their discretional income and having to prioritise other bills and repayments over their rent. This, of course, places rental providers in a difficult position, as they need to find a solution that protects their financial interests while also considering the renters needs.

How Long Is It Until Rental Payments are Considered ‘Late’?

Rent is considered to be in arrears or late if it is not received by the agreed due date. Generally, rent is paid monthly in advance.

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Are You Allowed to Give Renters a Notice to Leave for Rent Arrears?

As you will still have to meet your financial obligations as a landlord, such as mortgage and insurance payments, any prolonged period without rental income will significantly impact your bottom line.

In Victoria, once the rent is 14 clear days in arrears, a notice to vacate can be issued to the renter. The notice period on the notice is 14 days, however this notice is just the first step in the process and may not necessarily mean your renter will vacate within 14 days.

What happens if the Renter pays their rent after a notice to vacate has been issued?

If the renter pays the rent after the notice to vacate has been issued before the 14 day notice period expires, then the notice to vacate is automatically withdrawn.

In Victoria, if the renter receives 5 notices to vacate within any 12 month period beginning from the anniversary of their tenancy agreement, then the rental provider is entitled to apply to VCAT for a possession order, even if the renter eventually pays the rent.

What happens if the Renter doesn’t move out after the 14 day notice to vacate period ?

If the renter does not pay the rent by the date listed on the notice to vacate, and does not vacate the property, the rental provider must then apply to VCAT for a possession order to evict the renter from the property.

At this initial VCAT hearing, pending the circumstances it is common for the member to place the renter on a payment plan to pay off the arrears over time rather than issuing the possession order straight away. If the renter misses any payments on the ordered plan, the rental provider can request to have the case re opened.

Work with an Experienced Property Management Company to Handle All Rental Arrears Matters

When you have a renter not paying their rent, it can become incredibly stressful and time-consuming. Fortunately, if you are working alongside an experienced property management company, they can represent you and your interests in each of the situations described above. They will also have an intimate understanding of the industry and relevant legislation, allowing them to provide invaluable insight towards your best course of action.

For more information, please contact us at Dynamic Residential today.

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