An investment property or portfolio sounds like a dream to most people, an asset that appreciates in value whilst being paid off by someone else. Sounds great, doesn’t it? But what happens when you have bad tenants that compromise the value of that asset and your peace of mind?

As a landlord you have some security in the form of a deposit but there have been many cases where the damage caused by a tenant has far exceeded the deposit amount. Not only can the cost of repairs be significant but, if they take a long time to rectify, the loss of rent can also be substantial.

Furthermore, every time there’s a turnover in tenancy, there is also the marketing cost required to secure new tenants. However, the worst impact of all is possibly the time and stress it can cause to you, the landlord. So how do you avoid the mental, emotional, and financial stress of bad tenants? We have outlined what to do if it does happen and what you can do to avoid it in the first place.

Common Problems
There are serious breaches such as; non-payment of rent, major damage to the premises and illegal use of the property, all of which are straightforward to remedy with a sequence of notices and court if they do not vacate.

Breaches that are considered non-serious are a little more complicated to resolve as it’s not always possible to pursue these through the courts. These include; not keeping the property clean or taking care of the garden, housing an unauthorised pet, sub-letting the property, causing a nuisance to the neighbours, breaching strata bylaws, or not paying for water consumption.

What action you can take
For serious breaches such as not paying rent, the options are to issue either a breach notice which gives the tenant 14 days to rectify the issue (such as paying all their rent arrears) or simply issuing a 7-day termination notice to evict them if they are repeat offenders and you would rather they leave. If the tenant fails to adhere to the notice and vacate your property, you’ll need to obtain an order from the Magistrate’s Court. The tenant will be given a set period of time in which to vacate, but if they refuse to move out, law enforcement can forcibly remove them with a property seizure order. This is the last resort and, the most stressful, time consuming and costly if it gets to this stage.

For non-serious breaches, communication is key as court is not always a solution and, in many cases, a friendly and frank discussion will help clear up the issue. Issuing a breach notice to let them know that they have contravened their tenancy agreement, how long they have to rectify the infringement, and that termination of the tenancy will result if they do not address the issue, is possibly all it will take to resolve a non-serious breach. A good property manager will be able to handle this aspect with minimal fuss. If any problem hasn’t been rectified when the stated period ends, and you decide you’d rather evict the tenant, it is then possible to issue a notice of termination.

The issue with relying on Landlord’s insurance
Whilst landlord’s insurance is essential for any property investor, it’s not sufficient to eliminate all the cost and hassle of remedying the consequences of bad tenants. It is not only time consuming to make a claim, the insurance may not cover the issue in its entirety such as loss of rent, there will be an excess to pay and it’s also very likely your premium will increase. It’s much better to take steps to prevent an issue or remedy it immediately, than rely on landlord’s insurance to resolve it.

Prevention really is better than a cure
A preventative measure you may like to consider is regular structural inspections. Sometimes tenants are not necessarily bad, they can just be negligent in alerting a landlord or property manager to an issue which gets worse and causes more damage the longer it goes unresolved. Instructing a Surveyor or Building Inspector to check gutters, roof, loft space, grout and other areas that are not included within a standard property inspection, may save thousands if issues are identified and remedied immediately. A property manager will be able to make recommendations on reliable experts who can conduct these types of checks.

Why a property manager is essential in protecting your asset

Comprehensive Screening
The most important tool in ensuring you don’t end up with a bad tenant in the first place is tenant screening. A property manager will be extremely thorough in conducting checks such as references and credit ratings. They will cross check tenancy databases, commonly known as bad tenant registers, to identify if an applicant is listed.

Attracting great tenants
Prior to screening, a good property manager will implement marketing at the right level to attract the best tenants. They will also advise you on changes you should make to your property so it stands a chance of appealing to the best tenants, how your property is presented will also impact on how the tenants treat it. For some free, top line advice on attracting the best tenants check out our <a href=”https://propertymanagement.blackburne.com.au/attract-good-tenants/” target=”_blank” rel=”noopener noreferrer”>Advice</a>

Watertight Lease Agreements
Once great tenants have been secured through the right marketing and careful screening, a property manager will ensure the lease is watertight. A well written agreement will lay out all the necessary terms and conditions correctly so it is clear what each party’s responsibilities are and to ensure the landlord will have the legal high ground should any problems arise.

Management of the property
The property manager will perform a detailed move-in inspection and carefully document the condition of the property. They will also conduct thorough inspections at regular intervals to ensure any problems are identified as quickly as possible. Communicating regularly with tenants is also part of their job and by developing a good relationship, they can stay on top of any problems.

Handling serious matters
Despite all the mitigation activity detailed above, serious issues will arise from time-to-time and having someone with the experience to ensure notices are issued correctly and in a timely manner is going to save a lot of time and money. They can issue breach notices, a notice of termination, and if the tenant refuses to leave they can apply to the Court on your behalf. One wrong date or missing signature could result in starting the entire process again so it will serve you well to leave in the hands of an expert.

Questions to ask the Property Manager

The following questions are a good way to gauge a Property Manager’s level of experience in dealing with bad tenants:
• During the screening process, which factors do you check?
• What marketing tactics do you employ to attract the best tenants?
• How comprehensive is your move-in inspection report?
• How often and how thorough are your rental inspections?
• How much experience have you had in overcoming issues with a bad tenant?
• Have you been successful in rectifying issues without needing to evict?
• If you’ve had to evict a tenant, how long did it take?
• What is the worst situation you’ve experienced with a tenant and how did you handle it?

At Blackburne, we understand the importance of maintaining the value of your asset, and your peace of mind. We have the experience and capability to minimise the risk of a bad tenant. They are few and far between but unfortunately it does happen, so when it does you want an experienced team to efficiently deal with it as quickly and painlessly as possible.

If you require any help, the team at Blackburne are happy to offer free advice, please call us at your convenience to chat it through.