rent increase

[dook]

Hello all,
I have a situation to be looked at if anyone is interested.


1. Tennant been in property for 7 years for $120 a week.
2. Single mum with two kids respectable and friendly.
3. Apparently they got 2 weeks behind in their rent a year ago with other property manager and havent caught up.
4. My p.m. confronts them with new lease and rent rise of 10 a week ($130) wich is fair for the area, but because its a new lease they will be up for bond money, stamp duty? and other costs because he says the other p.m. is unlikely to come up with any of their existing moneys . comming to a substantial ammount, nearly $900 i think.
5. Tennant says its too much (having said earlier that she thought 120 wouldnt last as long as it did without a rent rise) leaving me to think that its all the other thats bothering her ($900) not the rent rise, is this normal.
6. The tennant says boyfriends boss has a house out in the sticks that they can have for $120 no bond or anything, im wondering is this a bluff as the school is right up the street here and her friends are at hand , not to mention her mother.
Is this sort of thing normal, I like to see the p.m. being firm with them (because of rent default previously) but i seem to think because its a sitting tennant and the p.m. cant charge a letting fee he may be pushing them out to get one, am i on the right track or parranoid. (the p.m. comes recommended and has a good rep.).
Maybe it will be good to start a fresh with tennants that havent been pampered by lennient p.m.s. With kids going back to school i feel it could be a bad time to start looking for a new tennant as i would think everyone would be settled in by now. mmmm maybe parranoid. Perhaps it wouldnt hurt to see the tennant to make sure she isint being pushed arround by the p.m.


God bless anyone who takes the time to read this and any response would be more than appreciated. thanks.

"Dook"

 

[Macca]

Hi Dook,

It would depend on how long you have owned the property. Does she owe you 2 weeks back rent? Did you sack the previous PM? Was the previous lease with you? Does your state have a rental bond board where bonds are lodged, if so she should have a bond with them from the original lease.
If the rent is fair for the area/property then you do need to be firm but not greedy.
Maybe she could pay off the arrears at $10/15 per week

just a few thoughts

 

[dook]

Hi Macca,
We have only just bought the property and the previous lease wasnt with us , yes we sacked the last p.m. wich she owes the back rent to.
Yes we have a bond arrangement here in w.a. so the last p.m. would have taken the money out of the bond trust i suppose .
I have been talking to some investors here and they think the best thing is to get rid of the tennants, use the money ive put asside to do the place up a bit and start afresh. I feel inclined to agree, what do you think?
Im learning on the run so this may sound cryptic.


Kind reguards "Dook"

 

[asy]

hiya Dook..

My first question is why is there not currently a bond being held?

And if so, where is it?

If there is a bond, the tenant will not have to pay another one. This one will continue through a new lease.

Let me know...

asy

 

[Kristine..]

Dook

If this new property manager comes 'highly recommended', who thinks they are wonderful? They don't seem to know the law, let alone common business practice!

The tenant does not owe the back rent to the other property manager, but to the previous owner, and no doubt this was 'forgiven' at settlement. If not, it is the previous owner's problem, not yours.

The bond previously paid should have been lodged with the central bond authority. In which case, for the current property manager to say things like ... " the other p.m. is unlikely to come up with any of their existing moneys" ... is nonsense. All that needs to be done is some minor paperwork, notifying the bond authority that the property is now managed by a new agency. The tenant probably has to acknowledge this but that should be about it.

For you to 'get rid of' the tenant, you will have to give the maximum amount of notice, 90 days for 'no particular reason', and she can appeal this. Also, once you have given her notice, she can leave at any time as the tenancy appears to be 'periodic', that is, from month to month, and not for a fixed term.

Are you really prepared to have the property vacant? And then to pay a reletting fee? And is stamp duty still payable on residential leases in WA? It isn't in Victoria, but each state is different. And other costs such as administration costs, will be your expense, not hers, as it is you who have requested the lease.

To increase the rent $10 per week is fair enough. But to frighten off an otherwise good tenant is not good business sense. You will lose the entire $500 per annum increase in expenses, and perhaps get a tenant who stays only a year and then you're paying the expenses again.

It is a good idea to see the tenant personally. Make sure you make an appointment, don't just call in.

If a property manager is really looking after your best interests, they should be doing everything they can to ensure a smooth transition with no complications. Upsetting the sitting tenant rather indicates a lack of experience, lack of care, or both.

And if there is no bond held anywhere, and if you want one - in Victoria it is not mandatory to hold a bond, but if one is lodged, then there must be a condition report, Centrelink (Dept Social Security) has access to bond money which is available to be 'loaned' to the tenant so that they can meet their lease obligations. So if the tenant is receiving a parenting benefit, or is a low income earner, she doesn't have to find the bond money herself but she would have to apply for it.

The property manager should know all this.

If everything ran smoothly under the previous arrangement, would you consider reinstating the agency agreement with the previous agency? It might be a lot less hassle for everybody concerned.

Congratulations on your investment. After these 'teething troubles' I wish you many years of problem free landlording!

Cheers

Kristine

 

[dook]

Hi Asy and Kristine thanks for youre reply.
Im probally not conveying this to well as i said this is all new to me.
Their is a bond being held from the last tennancy, they have been 2 weeks behind for about a year so i suppose the money (2weeks) would have been taken out of this bond (am i right).
Now apparently because their is a new lease to be written up more expenses will be incurred by the tennant, for a start the 2 weeks short fall in the bond and anything else that is incurred by a new lease, this is where the problem is as i think its this bit they cant afford not the $10 a week increase in rent.
One thing is for sure is that after talking to you guys i need to talk to my p.m. again to find out just what all the added expenses are and maybe talk to the tennant and make sure things are as theyve been stated to me . personally i think its the boyfriend thats the dropkick!
This area has just started to be redeveloped by a development group as they have a good track record in another previously public housing area and intend to do the same here. houses have allready been gutted in the street and worked on, theirs activity everywhere and we picked the house up for a song , so dont get me wrong we are happy just need to feel our way through this.
Youre replys are a huge interest to me as youd probally have experienced when you too were little

thanks all "Dook"

 

[bundy1964]

Hi Dook
Standard bond in SA is 4 weeks so if your bond system is similar there should at worst be 2 weeks left in there.

Asuming the worst and there is no bond left, the new bond would be around $500 based on 4 weeks rent so where is the other $400 costs in a new residential lease since most are just a standard form to be filled in if it is similar to what happens in SA.

My view is the agent is the dropkick.

bundy

 

[Sunstone]

Dear Dook,

As Kristine says wherever possible it is best to work with the existing tenant. A bird in the hand is worth two in the bush and will not result in the changeover costs that you will incur otherwise.

That said negotiation is partially a game of bluff and a house "in the sticks" is unlikely to be satisfactory to her. (Reasons being include: 1) Possible transfer of school for her children. 2) Movement away from current employment (The tenant would have chosen this location in the first place for a reason.) 3) Reconnection costs. -Reconnection of telephone ($65 or so), Reconnection of electricity, ?Gas, Redirection of mail etc 4) Actual physical effort to pack and move furniture etc, hire of ute, or cost to hire removalist.

The costs in actually moving are real and would be a consideration.

So what will be the additional costs involved? I analyse the additional costs probably as follows:

-New lease preparation. $15
-Shortfall in rent ($130 x 2) $260
-Shortfall in bond $40
(Upgrade from 4 weeks at $120 to 4 weeks at $130)

Total: $315

This cost:
-Over 6 months (prefered) $12.12/week additional
-Over 12 months (not prefered) $6.06/week additional

(Or an alternative period eg. 10 months that suits both yourself and the tenant by mutual agreement.)

This amount should not be excessive when a payment plan is presented to the tenant. It would also be the amount the tenant would have to pay to stay in the area anyway. (The reason I would not go for the 12 month period is that it can complicate issues when a 12 month agreement comes up for renewal. More tidy to have this fixed up before then.)

Get your PM to present it nicely but firmly taking into consideration these issues. Once the tenant can see the issues pointed out to them and you helping them by giving them an option of a payment plan to catch up there is a good chance that they will try and work with you.

In the event that they don't want to work with you then you have to look seriously at replacing the tenant as an unreasonable tenant will continue to cause problems for you in the future.

Cheers,

Sunstone.

 

[asy]

I would like to add one thing...

Be REALLY careful saying, well, there's 4 weeks of bond, so they are only 2 weeks behind, I'll be Ok...

The bond is really there to offset any losses, including damage or lack of cleanliness...

If there are only 2 weeks of bond left, this will have to cover any losses incurred.

We make a very strong point to tenants, especially tenants who give notice that bond is NOT TO BE OFFSET against unpaid rent. We insist that they pay rent in full, (I put on my fierce voice for that!! ) that way we still have the bond to hold over their cleaning abilities...

hope this helps,

asy

 

[geoffw]

Agreed Asy.

Additionally- the tenant has been there seven years. I suspect that the rent would have been lower then. So bond may well be lower than expected.

(If the rent was $120 pw back then, I'd suspect you either had a bad PM or had bought a low growth property).

 

[dook]

Hello all.
o.k. thanks for persisting with this post, next time ill post exactly what has been stated so im not confusing everyone. its just it all happened on friday and it left me wondering all weekend.
It goes like this,
Bond = 4 weeks rent (@ $130)= $520
Pet bond = $100 (they have a dog)
Two weeks in advance rent (standard here) = $260.
One weeks rent as letting fee=$130
Stamp duty calculated on gross rent, for this lease it comes to $33.80.

I realise not every state has stamp duty on their rent, or has a policy of two weeks in advance but here it seems to be standard as 3 real estate agents have quoted this i live in Bunbury w.a.
All up for the new lease $1043.80.
Because they were 2 weeks in arreas this has been taken out of the bond by last p.m. and because they lived in the place for 7 years the rest of the bond is going to be snapped up for bits and pieces, it seems the last owner was pretty slack and so was the p.m.
Above everything else it seems that these people are looking forward to getting out in the country so i think a fresh start is needed to get the place painted and landscaped at least, we,ll see how everything pans out.
Macca,Asy,Kristine,Bundy1964,Sunstone and Geoffw, thankyou all and any more that come .

"Dook"

 

[Matt Mc]

Correct me if Im wrong, in QLD it is not the tenants responsibility as such to pay the agents letting fee (or 1st weeks rent) that would be paid by the landlord and normally deducted from the first end of month payment....it could be different in W.A tho???

 

[asy]

Originally posted by Matt Mc
Correct me if Im wrong, in QLD it is not the tenants responsibility as such to pay the agents letting fee (or 1st weeks rent) that would be paid by the landlord and normally deducted from the first end of month payment....it could be different in W.A tho???

That's the way we do it. The landlord pays the letting fee out of the first week's rent.

asy

 

[dook]

Matt mc and Asy,


Letting fees / tennant responsibility=

Equivalent to 1 weeks rent paid by tennant each new tennancy.


Letting fees/owners responsibility=

The leasing fee is an ammount = to 8.5% of the gross rent for the term less the ammount = to 1 weeks rent (letting fee paid by the tennant).


Then 8.5% of the gross rent for the management fee.

On top of that routine inspections every three months $35ea. property condition report $59.55 , lease renewal $15, postage and petties $5.20 a month advertising $3.00 per line, end of financial year statement $15
final inspection $50

This is all pretty standard arround here by the look.

Thanks for youre reply.


"Dook"

 

[geoffw]

What- $35 inspection fees? Lease renewal fees? etc- and then 8.5%?

I've just come to appreciate my PMs a whole lot more.

It sounds as if PM's are following the example of banks and finding a whole lot more sneaky ways to charge more.

My charges. DHA- 15% + GST. Massive- but it does include routine maintenace, and it was my first.

Brisbane unit- 7% plus letting, advertising and postals. Renewals and inspections included. On site manager.

Canberra cottages. Same as Brisbane (discount rate for three at once).

Queanbeyan block of 9. 5% (discount for quantity and same agent used for purchase). Tribunal appearances have cost no extra either.

 

[Jacque]

Dook,

Reading between the lines, it sound to me as though you'd really rather start afresh and do your cleaning, landscaping etc and get a new tenant. Go with your head and do what is best FOR YOU. It is all very well and good to look after your tenants, but in the end the property is YOURS. If you wish to lose a few weeks rent to clean it all up and put it back on the market, then do so.

While you're at it, though, I'd be looking for another PM. Their fees are outrageously expensive- I can't believe they're charging so much for inspections and condition reports! These are usually incorporated into the fees in the first place. I know I'm in NSW but to give you an idea of how much I pay:

1. 7.7% Qld includes inspections, condition reports + $4 mth postage.

2. 6% NSW includes everything + $2.20 mth postage

3. 7.5% NSW includes everything + $3 mth postage (this PM also does quarterly inspections and goes back if it's not clean enough the following week to double check it!!)

Let us know what you end up doing, regardless.
It's always great to get feedback

 

[sbe]

I'm suprised that the previous PM could subtract anything from the bond money.

I always thought that was supposed to be there until the tenancy ended. And then, to cover shortfall (tenant nicked off), or damage to property.

Does anyone know if it's legal to do this mid-tenancy? Seems a little strange, as you then whittle away the money, and hence the bond's actual purpose.

Interested to see what the legality of this is.....and does it change state to state?

Cheers,

Simon.

 

[dook]

Jacque, thanks for the reply,
We havent much to choose from here . Yep, start a fresh that seems the way to go.

Hi Simon,
4 weeks rent @ $120 a week for bond= $480 - 2 weeks that they got behind leaves $240 .........Thats not a lot of money on a property left over for incidentals (im not expecting anything back) that has been lived in for 7 years without repair.
as stated earlier by Geoff rent was a lot lower back then as well.Thanks again.

"Dook"


P.S. As i have mentioned it seems standard here unless you want to do it youreself. But love to hear from anyone close by with a better P.M.