If your Tenant faces Financial Hardship

Life is messy and doesn't always go according to plan.  Situations can arise, even with the most dependable and reliable Tenant where they may not be able to pay their rent, or all of their rent, at a particular time.

Property Managers build relationships with Tenants and stress the importance of early and good communication in these circumstances, but this still may not mean that Tenants are able to advise of an arising problem.  A sudden loss of employment, significant accident or a death in the family can result in a lack of funds to meet their rent obligations.

If you have a good Tenant and the non-payment of rent is an anomaly rather than the norm, then it is worth considering entering into a payment plan or letting them out of the Lease in order to mitigate any further loss if there is no hope of their situation being resolved in the foreseeable future.

A Tenant facing hardship on the grounds of excessive hardship can apply to the Tribunal for an urgent hearing to terminate their Lease.  These grounds can include loss of employment, serious health issues, having to relocate for work or some other trauma.  There is provision for Landlords to claim compensation for the Tenant breaking the lease if they are not deemed to have “sufficient reason” and may include money for advertising the property and a re-let fee to the Agent.  In all cases, the Landlord and Agent have a legal obligation to minimise these costs.

Your options as a Landlord are to:

  • Mutually agree to terminate the Lease on a specific day. This should be done in writing.
  • Approve the transfer of the Tenant’s interest in the property and have the Tenant complete a “Change of Bond Contributor’s” form
  • Agree on a level of compensation and have the Tenant complete and provide Notice to leave in writing.
  • Enter into a payment plan for the Tenant to make up the overdue rent within a defined period.

When entering into a Payment Plan with a Tenant consider if this is feasible and likely.  There is no point in entering into a plan that the Tenant has no hope of actioning.  However, some Tenants may just need a little bit of breathing space in order to sell something of value to tide them over to when they start a new job, etc.   Payment Plans should always be in writing and agreed to by all parties.

Depending on the market, if your Tenants file for, and are granted, the right to early termination of the Lease, then you will be missing out on all rent.  Having a Payment Plan or accepting partial rent for a limited period will at least help off-set and mitigate your losses.  This can be a better option of no rent at all.   This of course is an exception and not a circumstance that you would allow a Tenant to repeatedly fall into.

Property Managers will have templates to use for Payment Plan Agreements and will monitor these on your behalf. 

A little bit of compassion and working with your Tenants in genuine circumstances can go a long way to building a long and enduring relationship that will be in the interests of all parties.