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5 tips to bring rent arrears under control, and keep them there

If you work in the profession of Property Management, then rental arears is a subject close to your heart. After all, that’s the main expectation of your customer (the landlord), that you’ll collect the rent in full and on time.

But every property Manager knows the pain of managing rental arrears in their portfolio. It’s a bit like having a toddler, if you let things get loose even for a moment, then watch out, you’re in trouble!

Most Property Managers list chasing rent arears as their least favourite task. It’s not surprising really, who wants to be chasing people for money? It’s a time consuming and thankless task that often tests our patience.

The problem of course is that if you’re not all over the arrears (and in a timely manner) then it just explodes on you; and then you’re also dealing with angry landlords who are short on their mortgage payments and wondering why they’re paying you the management fee.

The number one reason landlords take a management away from you is poor arrears management.

There are also different rules depending on what State in Australia the rental property is located. In Tasmania and WA, a Property Manager can issue a ‘notice to vacate’ giving the tenant 14 days to vacate the property when a tenant is 24 hours late in paying the rent. And if the tenant in WA is continuously late the ‘notice to vacate’ can be reduced to 7 days. In other states and territories, a tenant needs to be either 7 or 14 days in arrears before a ‘notice to vacate’ can be issued. If a tenant fails to pay the rent up to date by the time the notice expires, the landlord can apply to the tribunal/court to evict the tenant.

Confusing ? you bet it is – for you, the tenants and the landlords.

So here are 5 tips to bring your arrears under control and keep them there;

1. Have clear standards, expectations and consequences

Back to the toddler analogy… you need to set your requirements and standards and make sure they are both clear and understood by all parties. The tenant needs to know your expectations and what the results will be for noncompliance. Don’t just let them know of the immediate consequence (issuing a breach notice) but make sure they understand the ramifications of that happening (it stays on their rental history and could affect their ability to secure a home they want in the future etc).

2. Always act on the due date

Never miss a date, If you inform the tenant that you will issue a breach at 5 days then that’s when you do it, not on the 6th day and not after ‘just one more call’. If you’re seen as flexible on your commitments, then nothing you say from that point will be taken at face value.

3. Be consistent

Never treat tenants (or landlords) in a way that is inconsistent with your policy and pre-set procedures. If your standards are variable, then the reality is that you don’t really have any standards.

4. Provide clear unambiguous communication at every stage

Have a process of always communicating with all parties in a clear, precise way and preferably in writing so it can be referred to in the event of future disputes. Verbal communications are worthless if you end up in the tribunal with an uncooperative tenant.

5. Be helpful but firm

The key to being a great Property Manager is to be firm but always helpful and understanding. In the example used in point 1 a really good Property Manager will be able to explain to a tenant that as the Landlords representative they want to make sure that the tenant is never issued a breach notice as it can have an adverse effect on their ability to rent in the future, the notices and sms’s sent you are all to help avoid the situation arising.

Some of the above items are best managed in your tenant onboarding process and some will be covered in your operational systems.

You basically have a couple of options as to how you can implement the operational items. You can run manual systems off the back of your Trust Accounting product or you can choose a cloud hosted automation option.

Here’s the good news, an automated system can do all this for you. Just set your expectations and operational standards and let the system do the hard work for you. About 80% of the tasks can be automated and you’ll only need to engage those few cases where you need to make a phone call or a decision’s required in regards enforcing a breach notice.

It’s interesting that a lot of ‘old school’ Property Managers initially find an automated process quite unsettling. They’re used to seeing a complete list of all arrears every day and then having to make decisions on how to deal with them all. Once you automate, the vast majority of your arrears are just dealt with – all you get is the call list and the breach list (assuming you have any).

Like most new business practises the most difficult part of the process is for the people working in the system to change their habits. You shouldn’t try and make an automated system suit your old manual style of operations, you need to change what you’ve been doing to suit an automated system.

Best advice is to properly train your people on the new system then take a deep breath and implement it in full.

You’ll get your life back and you’ll be amazed at how quickly your arrears will get to levels of compliance you’ve only dreamt about!