Legal Q&A: Claiming Rental Losses

By
10/06/2012


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.

 

Landlord insurance

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.

 

The property manager

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.

 

Despina Priala | Your Investment Property

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Comments
  • Nik says on 01/04/2015 08:09:46 PM

    Hi Despina,
    I have a property in Melbourne CBD managed by Ray White. The previous lease for this property was till the 23rd of January 2015. On the 8th of Jan however, our agent, Leslie sent us an email saying that the tenants will vacate on the 13th of Feb and she will start advertising towards end of Jan. The head of rental department, Rebecca was copied in the email. As agreed, the property was advertised on various website between 25th and 27th of Jan. On 5th Feb we received correct rent and on 14th Feb a new tenant moved in.

    However, on 16th Feb we received an email from Rebecca that Leslie had resigned and there has been a discrepancy. According to her, Leslie put the wrong dates in the system and the previous tenant was incorrectly charged till the 13th of Feb. According to her the property was in fact vacant between 24th Jan and 13th Feb. She even refused to acknowledge the email sent by Leslie. She however agreed that Ray White advertised the property late, and hence they will not charge us the advertising fee ($200) but they will deduct that rent from 24th Jan to 13th Feb ($1750) from our next months payment, which we didn't agree to.

    We argued that since Ray White had advertised the property late, either Ray White or Leslie should bear the lost rent for the vacant period. In reply, Ray White delayed our next months payment by 11 days and then paid us the rent minus the $1750. They didn't charge us the advertising fee.

    We also asked Ray White for proof like Bond Release document that clearly shows the date when the tenant vacated the property. We also asked them to provide an explanation about why the property was advertised late. We did not get a reply. Instead, a senior manager from Ray White, Eric called me up and said if we pursue this matter, Ray White wont be able to afford our property and we might have to go to someone else.

    I would also like to add that a very similar issue happened in 2013 when according to Ray White, our tenant just disappeared 3 weeks before end of lease and Ray White said that the tenant's bond was release by mistake so we will have to bear the costs out of pocket. At that time, again it was Eric who kept arguing this. However, finally another senior manager, Andrew agreed that it was Ray White's fault and he gave us our money back.

    The two incidents lead me to believe that there is a pattern here. I have been overseas since 2012 due to work and I think Ray White is just trying to exploit this fact. This has caused a lot of headache for me and my family. I would just like to know about my rights as well as recommended path of action in this case.

  • sideeffect18 says on 06/05/2015 03:28:39 PM

    great advice..

  • Howard says on 06/05/2015 10:24:47 PM

    If you want to know about these rights, you should consider the near by real estate agent. Only they can provide with you full information.

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