Legal Q&A: Claiming Rental Losses

Despina Priala advises on evicting tenants and claiming rental losses from landlord insurance

 

Q: Three months into a one-year lease my Brisbane tenant decided to stop paying rent, but it was only after six months (into the lease) that I asked the property manager to proceed with formal eviction.

 

I had frequently requested updates on the eviction and even though there appeared to be no progress on this front, I was told not to worry because they were lodging a claim through my insurer.

 

As it turns out, my property manager didn’t formally lodge any of the paperwork necessary for eviction. The result is that I am now $3,500 out of pocket and my landlord insurer has knocked back my claim on the grounds that the property manager never lodged the paperwork via the courts.

 

I can’t help thinking my costs could have been substantially lower had the property manager done his job. Is there any basis for me to recoup my costs against the property manager?

 

A: In Queensland, if a tenant falls more than seven days behind in the rent the lessor/agent can give them a Notice to Remedy Breach, giving them seven days to pay the outstanding amount.

 

If the tenant pays the rent within those seven days the tenancy agreement continues. If not, the landlord or their agent can give the tenant a Notice to Leave. This gives them at least seven days to vacate and they have no choice but to move out within thattime frame. If the tenant ends up paying the outstanding rent it is the lessor/agent’s decision whether the tenant can stay. If they agree to let the tenant stay, this agreement should be given in writing.

 

If the tenant receives a Notice to Leave and does not move out, then the landlord can lodge an urgent application with the Qld Civil and Administrative Tribunal (more commonly referred to as QCAT) for an order for a Warrant of Possession. This order, if granted, forces the tenant to vacate the premises.

 

In the above scenario, it is unclear if the tenant is still in possession of the premises or whether they have vacated without notice. The fact that no action was taken against the tenant for at least three months does not preclude the landlord from now taking action if the tenant is still in possession. 

 

Certainly, it would be my recommendation that if the tenant is still in possession that the landlord immediately serve the tenant a Notice to Leave.

 

If a bond was paid the landlord should be able to recoup lost rent from it, and should discuss this with the agent immediately.

 

Depending on the type of policy and whether it extends to rent default, the landlord should be able to claim on his or her insurance for loss of rent, even if the tenant has not been properly evicted through a court order, or via a Notice to Leave. Generally, the insurer will pay for loss of rent for up to a period of time, or until such time as a new tenant is found or until rent payment recommences, whichever occurs first. 

 

This period of time will depend on whether the tenant is still in possession of the premises while in default or has vacated without notice to the landlord. 

 

The terms of any such policy should be properly checked before making a claim to ensure you are eligible.

 

If the tenant was properly evicted by the landlord’s agent in the first instance, then potentially the landlord could have found another tenant and been collecting rent. If the tenant has remained in possession all this time but has not paid the rent, the landlord has still missed out on collecting rent. 

 

Either way, the landlord’s loss is the rent that should have been paid which may include a claim for potential loss of future earnings of rental income.

 

In Qld, and no doubt in other states, licensed real estate agents are required to comply with a code of conduct administered under the Property Agents and Motor Dealers Act 2000. Such code of conduct in Qld includes acting in the best interests of the client, acting in accordance with the client’s instructions, acting honestly and fairly and keeping the client informed of any breaches. A complaint against a real estate agent as to their conduct can be made with the Chief Executive of Fair Trading in Qld. However, it would  be preferable to try and settle any dispute or complaint with the principal of the agent’s practice first. If this is not possible then further action may need to be taken.