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What happens if my tenant stops paying rent?


What happens if my tenant stops paying rent?


Having a dream tenant in your property is great. Everything is looked after as if it were their own home, and the rental payments always arrive on time. But what happens when your tenant stops paying rent? Hopefully, this isn’t a situation you’ll ever have to face as a property investor. Regardless, it’s important to understand your rights and what to do when those weekly or monthly payments stop. Keep reading for an overview what to do if your tenant stops paying rent.


Be mindful of your mortgage

Most property investors carry a mortgage on their property. Whether your property is negatively or positively geared, having the cash flow from rental payments each month is important. Tenants can stop paying their rent for several reasons such as financial challenges, job loss, falling ill, or living beyond their means. Just like having cash set aside for repairs and maintenance, having money available in case a tenant stops paying their rent can reduce the initial stress while appropriate actions are taken.


Keep your insurance up to date

Having adequate landlord insurance coverage can help in times when your tenant stops paying rent. If you have cover for loss of rent in cases where the tenant stops paying, you can submit a claim to be reimbursed for the missed rental payments. Another good option here is to get regular sales appraisals to keep the insurance value current – ask us (or your property manger) to get you a regular, non obligatory assessment, especially in a moving market.


Keep open communication with your property manager

If you have a good tenant who is facing a difficult time and you’re comfortable with it, you could have your property manager negotiate and agree with the tenant to make partial rental payments followed by larger or more frequent payments to make up the difference in the near future. Your property manager should already have clear lines of communication with your tenant, so making the time check in with them before issuing breaches can be a more amicable place to start, especially if they’ve been an otherwise good tenant.


How to escalate late or no rental payments

In cases where it doesn’t look like your tenant will pay their rent, your property manager will need to follow the steps relevant to your state’s tenancy legislation. The legislation differs between the states, predominantly in terms of when a breach notice or notice to vacate can be issued.


Generally, the steps to address (and possibly evict) a tenant who isn’t paying their rent is as follows:

  1. Communication between the property manager and tenant hasn’t resulted in an agreement on when and how missed payments will be made.
  2. A breach notice is issued.
  3. If the tenant still doesn’t pay their rent, a notice to vacate can be issued. Generally, this should be delivered via registered post and adhere to the timelines in your state’s legislation. For example, in Tasmania, as soon as the tenant is behind, this can be issued.
  4. File the matter with your state’s relevant tenancy body so the tribunal can make a decision. A possession warrant may be issued at this point.
  5. If applicable, follow the steps in your state to claim the tenant’s bond money to cover the missed rent payments.


Missed rental payments can be stressful. Having your property manager keep communication clear while taking the appropriate steps in your state to action the problem quickly can help you get your rental payments flowing again sooner rather than later.


Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.

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