When tenants face financial hardship and don’t pay their rent on time, their financial pressures can quickly transfer onto their landlords if landlords are unable to fill the repayment gap.
In the event that a landlord cannot access additional funds or does not have adequate Landlord Insurance, landlords run a high risk of defaulting with their lenders.
There are many circumstances that force tenants to fall behind in paying their rent that may not be intentional, including; loss of income, a work place injury or a run of unexpected bills to pay. Although landlords can be sympathetic towards some unforeseen circumstances, once arrears start to exceed beyond one missed payment, the process to recover outstanding arrears can be a long and often expensive.
According to the Founder and Director of ONYX Finance, Greg Clough, there are certain precautionary measures that landlords can implement to be best position themselves in the event that tenants fall behind on rent payments:
Tenant Selection Process
From the outset, ensure you follow a strict screening process and have approved the right tenants. Although many unforeseen changes in tenant’s finances may not be deliberate, landlords should take their time and be thorough when speaking to their employers and references; particularly tenants with a recorded rental history.
If you are managing your own rental property, ensure you are prompt in meeting tenant’s requests with any maintenance issues as they arise. Prompt attention builds a degree of trust within your landlord/tenant relationship. When trust is mutually established, the door is often open for communication, problem solving and compromise during any financial hardship when faced by tenants.
Saving for a Raining Day
Like with any business, landlords are encouraged to prepare a ‘slush fund’ to protect their credit rating in the event that tenant’s cannot pay their rent on time. Landlords must avoid payment defaults and a ‘slush fund’ should be established and readily available to access to meet repayment schedules.
We advise that Landlords invest in the right Landlord Insurance that also covers loss of income due to one-off or recurring late rent payments from tenants. For more information visit the Investor’s Guide To Landlord Insurance:
Undertsanding Tenant’s Rights
We encourage our property investment clients to familiarise and understand ‘Landlord Rights’ and also ‘Tenant’s Rights’ in accordance with their state legislation. By being informed of your tenant’s rights, you can better access and establish your case during the recovery of arrears process from lost rental income.
For additional information and professional advice, please contact ONYX Finance on 1300 1400 15