The recent bushfire disasters in South Australia and Victoria have prompted leading landlord insurance specialist,…
Landlords should not be complacent when it comes to protecting their rental income, according to landlord insurance specialist, Terri Scheer Insurance.
Terri Scheer Insurance Executive Manager Carolyn Parrella said a tenant who falls behind in their rent can put landlords under significant financial stress.
“Arrears can be a very long and costly process to resolve and may leave landlords considerably out of pocket,” she said.
Ms Parrella offers the following steps to help minimise loss of rental income.
“Monitoring arrears daily is an important task,” Ms Parrella said.
“Check your bank account the day the rental payment is due and continue to monitor the account daily.
“If your tenant has fallen behind in their rent, the sooner you know about it, the sooner you can attempt to resolve the issue and mitigate any financial loss.
“It may be worth considering appointing a property manager who can oversee this task.”
“If a tenant falls into arrears a breach notice should be sent to the tenant for non-payment of rent,” Ms Parrella said.
“If your tenant still doesn’t pay rent after receiving the first breach notice, a second notice should be sent to terminate the lease and request vacation.
“The number of days in rental arrears before a termination notice can be sent, and the time between presenting the notice and requesting vacation varies from state to state around Australia, so it is important to be familiar with your local tenancy laws.”
Serve the right notices
“Loss of rental claims on a landlord’s insurance property can be significantly affected if the policyholder has not taken appropriate steps once a tenant has fallen into arrears,” Ms Parrella said.
“Make sure you issue the tenant with the correct notices within the specified timeframes.
“Any delay in sending the notices may result in an invalidated or reduced claim if you make an insurance claim for loss of rent later on.”
“If your tenant does not vacate the property by the date stated in the termination notice, you will be required to submit an application to the relevant tenancy authority to request a hearing, which may result in a possession order to evict the tenant,” Ms Parrella said.
“Even the most reliable tenants can experience a change in their financial circumstances that could result in them no longer being able to pay rent.
“To minimise the risk of this affecting you and ensure your investment property remains profitable, it’s important to put measures in place to protect yourself and your property,” Ms Parrella said.
- Regular inspections
“Make regular property inspections a non-negotiable – every three to four months while a tenant is living at the property – and look for signs of neglect.
“If the property is unkempt, such as any excessive amount of rubbish stored within its perimeters or if there is accidental or malicious damage to the property, it may be an early indication that your tenants could fail to fulfil their obligations of the rental agreement.
- Positive relationship with tenant
“Maintain a positive relationship with your tenant. An open and transparent relationship with your tenant may encourage them to uphold their rental agreement, or advise well in advance if they are having difficulty with rental payments.
- Tailored landlord insurance
“Tailored landlord insurance policies are specifically designed to cover loss of rental income in certain situations and can ease a landlord’s concerns about receiving regular rental payments when a covered event happens at the property.”