TENANTS, if you can’t pay your rent, speak up quickly, all experts advise. The first thing to do is to communicate with the owner and try to make a plan with him or her, said Herschel Jawitz, chief executive of Jawitz Properties.
“The problem is many owners rely on the rental to pay their mortgage so options are limited in terms of helping a tenant who can’t pay.
“The worst thing a tenant can do is to simply terminate the lease and move out. This may put the owner in a position to report the tenant to a credit agency that owners and agents use to assess the quality of a tenant, which will impact on the tenant’s ability to rent in the future,” warned Jawitz.
Andrew Schaefer, managing director of national property management company Trafalgar agreed. Tenants should “quickly approach the letting agent or owner (if the owner is self-managing) to discuss payment issues”.
“Owners are generally amenable to assisting when approached early and honestly, especially in the current difficult market conditions with low rental increases, higher vacancies, difficulties finding qualifying tenants and escalating rental arrears.
“The earlier the approach, the lower the arrears, the more options and flexibility are available to make a mutually satisfactory plan. An acknowledgement of debt (AoD) – an agreement that allows the tenant to pay off the arrears without detracting from his or her liability for rent that is due; early notice; lower rental increase; and reducing services costs are all considerations to assist with cash flow and affordability challenges.”
Ben Shaw, chief executive of HouseMe, an online rental disruptor, said “providing an update sooner rather than later when you are not able to meet your financial obligations, or when you will pay a bit late, is the best option”.
“This could help prevent additional charges, and animosity building in your relationship. Given the economic climate, a commitment to pay back over time will see many good tenants retain their rental contracts rather than be forced out. Landlords do realise how tough it is, and don’t want to go through the hassle of finding another good tenant.”
Early intervention protects landlords’ investment against defaulters.
Just as timing is everything for tenants, so is it for landlords. If a tenant is not paying rent, intervene early, advised Trafalgar’s Andrew Schaefer.
“Negotiate a decisive solution, including the option of vacating the unit before arrears become unaffordable to settle. Don’t tolerate a broken promise to pay. Give notice for the unit to be vacated and stick to that.
“A legal eviction should be the last resort and only necessary in exceptional cases as it is hugely expensive, delayed and, in general, an unsatisfactory option.”
Shaefer urged landlords to always try to solve the issue within the deposit rental cover period (one month if the deposit covers one month’s rental).
Ben Shaw of HouseMe said landlords do understand there are certain things over which tenants have no control – “a job loss, an unexpected medical bill or family emergency”.
“Should a tenant stop paying, get in touch. Most times you will be able to come to a fair repayment plan as good tenants want to stay in good properties. The best cash flow protection would be a rental guarantee covering your loss or late rental while you negotiate with your tenant.”
HouseMe’s Rental Guarantee has been designed for this. For only 1% of the rental price, you can expect cover for up to three month’s rent if the tenant defaults. “In a tough market for consumers, landlords also struggle. Late payment of rental causes them to miss bond payments, and vacancies prevent bonds from being serviced. Key to resolving these concerns is fair pricing. At the right price there is always demand, and rent remains affordable,” said Shaw.
Article by: VIVIAN WARBY 7 January 2019 | PROPERTY 360