managing agents and bad tenants

From: Anton Madievski


Dear Forum,

The tenant in my rental apartment left before the lease expiry, two months in rental arrears and with malicious damage to the unit probably in tens of thousands of dollars. This was the very first tenant in the
brand new apartment. This was my first experience with property investment and I did not have landlord's insurance. The agent managing the property is holidaying and is not contactable. Other Raine & Horne agents do not want to touch this. Obviously, the unit cannot be rented in its current condition, but I was told that nothing can be done before the managing agent is back. Furthermore, Raine & Horne do not know if
the keys have been returned.

I feel that the managing agent did not do a good job checking the references and ensuring the tenant is up to date with the rent
payments. Every time I brought rental delays to agent's attention, he responded that the tenant is a very nice person and it would be inhumane to evict him. I wonder what should I do? At the mean time, the unit is untenanted and no repairs can be started
until the managing agent returns from holiday and no one knows when he is coming back.

I would much appreciate your advice.

Sincerely,
Anton
 
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Reply: 1
From: Alan Hill


This sort of thing really annoys me too Anton.

I have a pretty simple relationship with my tenants. I keep the properties in excellent condition and when any problem is bought to my attention it gets fixed straight away. In return, I expect, nay demand, the rent is always paid on time. This is not negotiable.

If rent payments are more than 4 days late, they get a letter the following day....no later. If it's not in the bank within another two days then they will have a very attentive landlord!

I understand how some landlords like to offer tenants little gifts or inducements for paying rent on time. While this may work for some, personally it is not a policy I've ever even thought about pursuing. To me this creates an atmosphere that the tenant is doing you a huge favour by paying you on time and this deserves some sort of reward.

A lease is a contract between two parties. I intend to hold up my side of the contract and I expect nothing less of the other party.

It never ceases to amaze me how certain, so called, property managers can let payments get months and months behind.

The sooner this sort of thing is jumped on and the tenant has a very clear idea of how far you can be pushed, personally I believe the less problems you will have in this area. If I was asked if most of my tenants were short or long term, I would have to say long term. Being firm on rental payments while looking after the property will not lose you tenants.

Try not to let this experience put you off your goals though. Rental properties mean tenants and tenants can sometimes cause problems(I had one reverse out of the garage a couple of months ago......ouch.....wish they'd remembered to use the remote to open the door first!).....but on the whole a lot of these problems can be managed and will appear negligible in years to come compared to your capital growth.

Sorry I can't be much more help Anton. Unfortunately there are only two solutions.......get a very good Property Manager next time or spend the extra time and do it yourself. If you do take the second option make sure you educate yourself as much as possible before that first advertisement goes in the paper though. Don't want to jump out of the pan into the fire!

Good luck.
 
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Reply: 1.1
From: Day Dreamer


Hi Alan,
Just a matter of curiosity do you have an agent or if you manage the properties yourself.
 
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Reply: 2
From: Eddy Morris


Dear Anton,

Firstly, you have my sympathy! Without being able to contact the agent responsible (its nice to know he's having a holiday on your money), I would immediately detail all of this in writing to to the Real Estate Institute of NSW (if you are in NSW) who supposedly control all licensed agents. Include some photographs..that might bring home the seriousness of this situation.

Your agent has been seriously remiss on a number of levels. Have you made any attempt to try and trace this "very nice" person so you can institute legal proceedings to recover your damages? Who did your agent contact when recommending this tenant. Did they for example search any database history of tenants?

When you are speaking of your agent are you speaking of the principal of the firm/agency you are dealing with? It seems here you will need to sue the tenant AND the agent. Got a good solicitor?

Good luck! Regards,

Eddy
 
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Reply: 1.1.1
From: Alan Hill


Wai,

I self manage.

I'm not exactly in the envious position of some of the Forum of having a large portfolio to manage so it's not difficult.

Personally if and when I do get a 'professional' manager I'll be much more aware if they try and 'pull the wool over my eyes'! I heard a classic the other day of how much time a particular Property Manager said a task would take. About a ten time exaggeration I would have said!
 
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Reply: 3
From: Robert Forward


Hi Anton

Please let me firstly say that I sympathize with your problem. And I do not intend to be mean with the following but I want to ask a some questions which is intended to help the "newbies" with their investing.

You state that you did not have any Landlord Insurance. Please tell us why you didn't think it necessary. Your story should be a screaming alarm to all investors to have the appropriate insurance on your investments. The cost of this would/should have only been around $300pa and this would have given you recourse for a quick turn around in getting your place fixed and back into a habitable state for tenancy again as well as recovering your lost rent.

IMHO, insurance is a MUST with every property that own, it is a risk management issue. I lower all my risks as much as possible. And yes I've recently had to place a claim in for $4k after a fire damage issue in hte unit complex that one of my properties is located. It took me 2 weeks to have everything fixed and my tenant back in and rent coming back into my pocket. And besides insurance is a tax deduction too. I do hope that from here on that you take out the needed insurance to cover yourself in for problems.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 4
From: Sandor K


Hi Anton

Sorry to hear this kinda news, but I had some similar experiences with one
of my tenants. In my case they have been in arrears for 2 months and
although I was upset because the agent didn't inform me in time (partly it
was my mistake too, I 'trusted' them too much). Anyway, I was told by the
agency, that if they don't pay the missing rent + any damages (fortunately
there wasn't any), then the agency will let the Credit Authority (or
whatever they called) know and the tenants won't be able to get any credit
in Australia until they pay everything back. Also being on that list will
make them harder to rent too, if the property managers do a check on them.

Hope this helped, and just would like to add that this forum is very-very
good and although I have been quiet so far, I have learnt a lot of things
from here.

Sandor
 
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Reply: 4.1
From: Roderick Aguilar


Anton,

I symphatise with the predicament that you are in. It is unfortunate for such a thing to happen to you with your first IP. But from experience, I can tell you now that there is a lot of money to be made in property so therefore do not be discouraged by this incident. Rising from this setback will make you a stronger investor. You will realise the many risks involved with investing and you will use this bad experience to keep reminding yourself to manage those risks. Insurance is just one of the many things you can use to minimise those risks.

But if I were you, the very best advice that I can give you right now is to lodge a claim for your tenant's bond with the Rental Bond Board (Dept of Fair Trading). Rather than instruct the Real Estate agency (as anyone of them in the office can do this) to lodge the claim for you, ask them for a copy of the form or better still I think you can get the form from the Post Office and do it yourself asap.

By lodging the form you can secure the whole amount of the Bond money (usually four weeks rent) that can go towards loss of rent and to fixing the damaged property.

The first thing these types of tenants do when they vacate a place is lodge a claim with the Rental Bond Board. Like any government department, the Rental Bond Board just follows procedures. They will merely handover the bond to whomever lodges the claim first. Now if the tenant has already lodged a claim you have ten (10) days to lodge a counter claim. If the Rental Bond Board does not receive your claim by 5pm on the 10th day then they will merely release the bond to the managing real estate agency. And the R/E agency has no power to hold onto it and will have to give the money to the tenant. The tenant will have the money in his hands by 3pm the following afternoon.

Hope this all makes sense and hopefully the tenant has not also robbed you of your bond money.

Cheers,

-Rod.
 
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Reply: 4.1.1
From: Roderick Aguilar


Anton,

One thing I forgot to add is that, if the tenant has already placed a claim on the bond money or upon you making a claim on the bond, he/she makes a counter claim then unfortunately things can get messy.

If there is a counter-claim on the bond, the Rental Bond Board follows another procedure. This usually means either you or the tenant will have to take the other party to the Residential Tribunal. Since it is you wanting the money then unfortunately you will have to be the instigator. Cost is about $25 to lodge a claim with the Tribunal. A solicitor can't represent you on the Tribunal but you can get their advice on how to present your case. The solicitor cost me about $300. Have the following to convince the judge why you should be awarded the full amount:

1) Take lots of pictures (dated if possible) to show the damage caused by the tenants. Even better if you have "Before" and "After" shots.

2) Get the real estate agency, anyone of their property managers can do this (shouldn't have to wait for anyone to come back from holidays) to do a Condition Report on the place and make them sign it. Make sure you go with him/her so that he/she does not miss anything. This is a good one as the judge merely sees the Condition Report that the tenant signed upon moving in and compare it with the Condition Report upon vacating the premises and you should win it on this count alone. This is because the Condition Report has been done by an independent third party (the managing agent). A bit harder to prove if you managed the property yourself.

3) Keep a log of events including dates, phone calls, with whom you talked to ...etc.

4) Write a letter to the Real Estate agent outlining that you will be taking the tenant to the Residential Tribunal. (they will try and discourage you as it could mean trouble for them but don't let them. Remind them that you pay them and not the tenant and that they should be assisting you, not the tenant).

5) Get your Real Estate agent to write a letter to the tenant stating that you will be claiming the whole bond and provide a full list of the damages caused. By law (it's on the Tenancy Agreement, can't remember the clause number) the tenant must leave you or the managing agent with a forwarding address.

6) The Residential Tribunal will ring you and make a time for the hearing.

7) On the day the tenant may not even show up in which case the decision goes in your favour. The tenant may never have intended to turn up but it's just another way of him/her inconveniencing you to rub salt to the wound. It's not fair but unfortunately that's how it goes.

The good news is that once you have records and pictures that show the damage, you may go ahead and fix up the damage and rent the place out again. The law does not expect you to wait for the results of the Tribunal before undertaking repairs to the property in question. They realise that you will need the rental income and they know that the Tribunal can take several weeks or months to be scheduled depending on how busy they are.

Cheers,

-Rod.
 
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Reply: 4.1.1.1
From: Owen .


The only other tip I have heard is make your letters to the tenant registered mail. This way they have to sign for it and you have confirmation they received it. They can't pull the wool over your eyes and say 'I didn't get it' when they don't turn up to the tribunal.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.2
From: Eddy Morris


Hi Alan,

I like your strict approach but each time I have tried to take a similar tack I get "but we cant do anything until they are two weeks late!" comment from my "agent" (the one who gets paid for doing very little).

Rgds,

Eddy
 
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Reply: 4.1.1.1.1
From: Jan Hellyer


Hi Anton,
Hope by now you are back on track. Reading your story was deja vu as the same thing happened to me. My landlords insurance only covered the building. Needless to say I changed companies & now have a water tight policy. My tenant wasn't paying as she wanted to be evicted so she would be placed at the top of the list for public housing. My property manager was also very soft. My tenant took 5 months to vacate. Fortunately minimal damage but no rent.
My Lesson: Demand the letter be sent immediately the fourteen days are up, then proceed immediately to eviction even if the rent is paid..no ifs or buts!!!! If they are still on the lease then that will slow the process down. If they have been late with the rent once it will happen again & again!! I also scored a cheaper managing fee (permanently discounted by 2%), so it might be worth jumping up & down while watching your properties verrry closely.
As long as we learn & keep going!!!!!
Regards to all
Jan
 
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Reply: 1.2.1
From: Alan Hill


Eddy,

Sorry I don't have access to all the paperwork in front of me at the moment, but I think your Agent is 'confusing' the 2 week issue.

From memory, once a tenant is 2 weeks behind in payment they are technically in breach of the agreement and you are entitled to begin the eviction process if you wish.

However,this doesn't mean you have to wait two weeks to chase up the tenant!!! Theoretically you can do it after 1 day if you like and I would want any manager of mine to be doing it within 4 days at least.

I want to be in the position of giving the tenant plenty of opportunity to pay right up to the 2 week point. After 2 weeks I will begin eviction. The longer you leave this the more you are opening yourself up to a big gap between rent owed and rent received.

With one tenant I let this go on for a while. They were 3 or 4 days late, then a week, then 10 days and on it went. I reminded them, I warned them. I let them renew a new lease on the understanding that prompt rental payment was definitely required and finally I had enough. They reached the 14 days late point and I began the eviction process.


I'd get in touch with your property manager again and say you expect late rental payments to be followed up well before the 2 week point.

Good luck.
 
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