What investors can learn from PM’s daughter’s rental dispute

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News of prime minister Tony Abbott’s daughter’s tenancy battle has inflamed social media this week – showing up a clear division between those who believe the landlord was at fault and those who believe Frances Abbott was.

Frances Abbott signed a one-year contract on a flat in Prahran, Melbourne. Three days later, she withdrew from the agreement.

Her decision to break the lease came after a visit from the prime minister and a security assessment by the Australian Federal Police and the Victoria Police. Landlady Janine Moussi offered to make some repairs to the property, but Abbott declined.

Moussi then took the case to the Victorian Civil and Administrative Tribunal in a bid to get compensation for the lease break after it took her eight weeks to find new tenants. However, VCAT found in Abbott's favour.

While some have claimed the VCAT decision was due to Abbott’s family status, others have said Moussi may have been guilty of false advertising [about the flat’s condition] in the first place.

Rent My Estate director Michael Gilbert said VCAT’s decision in the case seemed in keeping with its usual practice.

“Most tribunal members push both parties evenly to show proof. If you can't show proof you won’t win at Tribunal and that's where most tenants fall down.”

Claims that a property was “unsafe” would always prick the attention of a Tribunal member. So if a tenant had a police report stating a property was “unsafe” a Tribunal member would have little choice but to find in their favour, Gilbert continued.

“However, most tenants would not get away with this because they would find it very difficult to get the police to the property to write a report saying it’s unsafe.”

Gilbert also said the fact that the flat, which was in an area not considered to have an oversupply of rental properties, subsequently took so long to rent out could mean it was overpriced and/or in poor condition.

The dispute should be of interest to investors because new SQM Research data showed that – thanks to a genuine increase in rental dwellings on the market - the rental market could be swinging in favour of tenants.
SQM Research’s Louis Christopher said vacancy rates would gradually rise over 2014 and that, due to large increases in building approvals, higher vacancy rates in 2015 and 2016 were likely.

This means that not only would it be increasingly difficult for landlords to raise the rent in the foreseeable future, but that tenants would have greater bargaining power generally.

Gilbert said the important lessons that landlords could learn from the Frances Abbott case were:
 
  • If a tenant said something was unsafe, alarm bells should go off and the item in question should be repaired without delay. Some smart tenants might use the “unsafe” card for ulterior motives, so it was important not to let anything get to that stage in the first place.
     
  • Always ensure a property was safe. This meant that all locks should be working, all keys should be supplied to tenants and all windows should slide well and lock. Security was very important as it went hand in hand with safety.
     
  • Go above and beyond to keep up with the maintenance of a property. Not only could doing so help avoid a situation like Frances Abbott's, but it helped to find tenants quicker and it helped to keep them longer.
     
  • Try to ensure any potential tenant was suitable for the property before accepting them as a tenant. In the case of Frances Abbott, the landlady should have questioned her more than usual - because of her status – to determine whether the property was suitable for her needs.
     
  • Keep a stash of cash for unforeseen situations. Put a bit of money aside each week so that if a situation like that involving Frances Abbott arises, or the hot water system blows up, there was money there to resolve the issue. This could help prevent a tenant terminating the lease.
However, Gilbert added that tenants also had a responsibility to properly inspect a property, prior to signing a lease, to determine that it met their requirements.

“Frances Abbott failed to do that. In my opinion she should have got her Dad and the police to look at it before signing the lease.”
 
 
 

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Comments
  • Kurzo says on 20/06/2014 10:59:07 AM

    No mention of a leasing agent in article so we are to assume the biggest lesson of investing was not heeded or lesson mentioned in this article - use an agent. Some investors try to 'save' money by self managing also try to 'save' money on maintenance with obvious outcome with this extraordinary tenant. Now $3-4k out of pocket.

  • Michael Gilbert says on 24/06/2014 09:56:57 AM

    Hi Kurzo, the property owner in this case was already using an agent therefore I did not mention it within the interview. Cheers.

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