From late rental payments to damaged property, here’s everything you need to know about dealing with difficult tenants.
We’ve all heard horror stories about landlords who have been cursed with terrible tenants. They fail to pay the rent, turn a previously immaculate house into a squalid dump and trash the place before leaving.
Unfortunately, bad tenants come in all shapes and sizes and are a risk every property investor needs to consider before purchasing real estate. While they are not always as bad as the nightmare tenants mentioned above, they can still cause you a lot of hassle and heartache.
Let’s take a look at the common problems bad tenants cause, how you can solve tenancy problems as quickly as possible and ways to avoid getting stuck with bad tenants in the future.
Common problems caused by bad tenants
No matter how rigorously you screen potential tenants, it’s still possible to end up with renters who continually cause you stress. Some of the most common issues include:
- Failing to pay the rent. From missing the occasional payment to systematically dodging their obligations, bad tenants can leave you significantly out of pocket.
- Causing damage. If a tenant doesn’t take proper care of your rental property, you could be left with repair bills worth thousands of dollars.
- Conducting criminal activity. Whether it’s selling stolen goods, running a drug lab or anything in between, tenants conducting criminal activity out of your rental property can have disastrous consequences.
Other issues caused by problem tenants can also be an unnecessary hassle. For example, you might have a tenant who constantly complains, regardless of whether or not there are are legitimate concerns you can address. From complaints about noisy neighbours to unreasonable demands for upgrades to the rental property, dealing with such tenants can be time-consuming and stressful.
Dealing with difficult tenants
Here are five things you can do that can help make the process of dealing with difficult tenants as smooth as possible, and prevent minor disagreements from escalating into a serious headache:
- Assess the situation. High tenant turnover is never a good thing for a property investor, so letting a tenant out of their lease or evicting them should be a last resort. Instead, take stock of the situation and determine whether there is an easy solution that will keep you and the tenant happy.
- Take emotion out of the equation. When it comes to investing, you should never let your heart rule your head. Sometimes the best thing you can do is take a step back and examine things rationally rather than letting your emotions get the better of you. Keep your cool and discuss any issues calmly and frankly.
- Communicate. Working to build a good relationship with your tenants can save you a lot of stress in the short- and long-term. You might also be surprised at how many issues can be solved by simply talking to a tenant, listening to their problems and showing that you are willing to try and find the best solution.
- Know when to stand firm and when to compromise. Sometimes you just need to trust your gut and decide when a tenant is taking you for a ride and when they have an honest problem. For example, if a previously reliable tenant is struggling to pay the rent, perhaps they’re experiencing short-term financial problems after being made redundant. In this case, giving them time to get their finances in order can work out to be much better in the long run than immediately getting the eviction ball rolling.
- Use the rental agreement to back up your arguments. The tenancy agreement contains details of a tenant’s rights and responsibilities, so make sure to refer to it if you ever need any support for your requests. There’s also some useful information on some of the terms and conditions you should include in the agreement later in this article.
What you can do
Know your rights
Before you buy your first investment property, make sure you’re fully aware of your rights and responsibilities as a landlord as well as the rights of your tenants. Tenancy laws vary between Australian states and territories, so check the relevant Residential Tenancies Act for information on things like:
- Notifying a tenant that they have breached the rental agreement
- How long the tenant has to fix the breach; and
- How you can terminate a tenancy if a breach is not fixed
Doing research before there’s a problem will ensure that you are well placed to act if difficulties develop.
Getting the right agreement
To make sure that you have the legal high ground if problems arise with your tenants, there are several terms and conditions you should consider including in the tenancy agreement. These include:
- The rental amount and when it must be paid
- The tenants’ responsibility to inform you of any maintenance issues and to pay for any damage they cause
- The number of tenants that are allowed to live in the property
Including these conditions in the agreement will prove helpful if you ever need to issue a breach notice.
Issuing a breach notice
If a tenant breaches the terms of the tenancy agreement, you should issue a breach notice as soon as possible. This is a crucial legal step you need to take if you later decide that you want to have the tenants evicted. The laws in each state and territory provide guidelines on how to issue a breach notice, and the time frame the tenants have to remedy any breach. If any problem hasn’t been rectified when this period ends, you can issue a notice of termination.
Issuing a notice of termination
The exact process and time frames concerning termination notices also vary from state to state. For example, in NSW tenants must be given a minimum of 14 days to vacate after being issued a termination notice, while in Western Australia the minimum is seven days.
However, if the tenant fails to adhere to the notice and vacate your property, you’ll need to follow the applicable legal steps in your state or territory to legally regain possession of your property. In NSW, the execution of this order is handled by the local court sheriff’s office, while in Queensland the eviction is handled by the police.
Make sure you have landlord’s insurance
Last but not least, make sure you have an adequate level of landlord insurance cover in place. Not only will this protect your building and contents against fire, storm and other damage, but it can also provide cover for malicious damage by tenants and lost rental income when your tenants fail to pay the rent.
How to find the right tenants
- Find a good property manager. If you’re not an experienced property investor, enlisting the services of an experienced property manager you can trust will improve your chances of getting a reliable tenant. Your property manager will know what to look for in a tenant and any ‘red flags’ that signify applicants to avoid.
- Think about the tenants you want to attract. If you want to attract tenants from a specific demographic, keep this in mind when choosing an investment property. Also remember that the way you present your property will have an influence on the way the tenants treat it, so an immaculately presented property has a better chance of attracting great tenants.
- Use a database. There are multiple tenancy databases that collate lists of bad tenants and provide a useful resource for real estate agents and landlords when screening tenancy applications. These sites, such as the National Tenancy Database, list bad renters whose tenancy has ended and whose rent is in arrears by an amount larger than their security deposit or who have breached their tenancy agreement.
- Screen tenants. Check the references of potential tenants and even consider credit checks to determine whether an applicant will be able to pay the rent. Even if a potential tenant passes every test with flying colours, if you’re still unsure about their suitability, trust your gut instinct and walk away.
- Stay in regular contact. Communicating with tenants regularly is one of the best things you can do to prevent any problems arising. That way you can stay on top of any maintenance or repairs problems and by making yourself easy to approach and deal with, you’ll hopefully be able to develop a good relationship with your tenants.
- Conduct regular inspections. Check the laws in your state or territory to determine how often you can inspect a property you own. Exercising your rights for regular inspections will help you learn of any problems as quickly as possible, such as damage to the property or too many tenants living there.
Finally, it’s worth remembering that the majority of tenants are reliable, honest people, so don’t let one bad experience ruin the way you deal with all future tenants. Take a few simple steps to maximise your chances of finding a good tenant and if problems do arise, make sure you have a plan for dealing with them.