Has your tenant Paid their rent? What can you do if your tenant cannot meet their contractual obligation? Here is some information on how to manage non-payment from tenants who have been financially affected by the pandemic. 1. Does my tenant have to pay rent? Absolutely yes. Rental in terms of residential lease agreements must be paid as the tenant is in occupation of the property and is directly incurring use and enjoyment of the property. Please see article relating to commercial lease agreements here. 2. What can I do if my tenant cannot pay their rent? Before considering what options you as a landlord have to limit your cashflow loss, it is important that you must obtain some sort of proof that a tenant is unable to meet their financial obligations. You can use a tenant income declaration form, (any documentation spoken of in this article can be provided to you free of charge by your agent ) or the tenant must provide bank statements or a letter from his/her company. There are various stratergies we can utilise to offset the finacial implicaions for the Tenant and Landlord, many of which may vary from lease to lease, however the common structures in place include the following :
A. Deposit utilisation agreements
This structure is an agreement between BOTH parties where the landlord AND the tenant agree to use the deposit to cover the rent, or part of, where the deposit will be recouped in one or multiple payments over the remainder of the lease. Where the lease is due to expire shortly after the lockdown, an addendum to extend the lease agreement may be used so that the tenant has more time to pay back the outstanding deposit.
B. Rental Deffer
The Second structure to assist with the financial impairment is to defer the rent, with this option, the tenant can agree with the landlord, to pay back outstanding rental over a certain period, without utilizing the deposit. Options to extend the lease also apply.
If no agreement on the terms of the above scenarios are met, the tenant is automatically placed in breach of contract if no payment is made, and the landlord may send a letter of demand to the tenant and continue with the normal default procedure. Please note that letters of demand will only be avaible for clients who have managed leases with us.
What is most important to note, is that these above options are only valid if both parties agree to it.
The NCA has deemed that lockdown days are NOT business days, however for both the consumer protection ACT and Rental Housing ACT, business days are included during the lockdown, this means we are unable to blacklist in the usual time frame as usually provided.
If you are unable to find an amacable solution with your tenant, please contact us for advise on email@example.com so we may assit you through this time.
Written by Angelica Fisher