A cautionary tale for landlords

A cautionary tale for landlords

Honest Broker’s affiliate, eezirent, provides services for self-managing landlords.  One of those services is advice from a qualified property manager.  Recently they gave assistance to a landlord in a particularly tricky situation.  One that serves as a warning to all landlords.

This landlord found themselves in the not uncommon situation of a break lease, with the tenants wanting to vacate the property some three months early.

In keeping with legal obligations, the landlord did all they needed to ‘mitigate the loss’ of the tenants.  They advertised the property in the usual fashion for the same rent.  Unfortunately, this property is located in a difficult rental market and inquiries were few.  This is where the trouble began.

The tenants began putting considerable pressure on the landlord to drop the rent and to approve an unsuitable applicant.  The landlord agreed to the rent change on the condition that the tenants pay the difference until the end of the  existing lease.  That might sound like a fair deal.  However it is a very difficult one to enforce.   It is rare that outgoing tenants will keep their end of the bargain. When they fail to do so, there is virtually no recourse for the landlord.

The applicant the tenants wanted approved presented themselves at the inspection with a stench of alcohol, was unable to provide any referees and had an income that did not meet the industry standard of affordability.  Quite understandably, the landlord rejected this application.  Which resulted in some unpleasant communications from the tenant.  They then insisted on being given the contact details of all people who inquired as they accused the landlord of rejecting suitable applicants.

The story so far raises some questions.

Can vacating break lease tenants force a landlord to reduce the rent?

No.  The landlord is entitled to try to find a replacement tenant at the same rent level.  Admittedly though, if a significant amount of time elapses with no approved applicants, in a market where rents are falling, it might be difficult for a landlord to argue the case to maintain the rent should the matter proceed to Tribunal.  This aside, it is not the tenant’s place to dictate the property rent.

Can vacating break lease tenants be given the contact details of applicants? 

Definitely Not.  This is a significant breach of privacy requirements.  The standard privacy disclosure on a tenancy application gives permission only to the landlord/manager to contact only referees of the tenant.  Any person inspecting a property or lodging an application would never think their details are being provided to previous tenants.  In this case, the landlord quite rightly refused this request.

From bad to worse – no bond

Aside from this pressure, the situation was made worse when the break lease tenants vacated the property.   They left the property in a poor state – unclean and damaged.  The only consolation the landlord had was the bond.  However, they discovered the bond did not exist.

Unfortunately, the landlord, who has multiple properties and is experienced, departed from usual practice and allowed the tenants to lodge the bond themselves.  Apparently they were reluctant to sign up on any other basis telling the landlord that they had been burned before with landlords keeping their bond and no lodging it with the Authority.

The landlord readily acknowledges their mistake in a) trusting the tenants and b) not following up with an early check  that the bond had been lodged.  However, things can be difficult when dealing with forceful, persuasive people when you’ve got a vacant property.

What are the lessons to be learned?

Don’t be pressured by tenants in a break lease situation. Keep in mind that the situation is of their making, not yours.  Your obligation is to advertise the property in the usual fashion, at no more than the same rent and to not reject an acceptable application.

The vacating tenants have no role to play in processing an application or approving replacement tenants.

Always control the bond lodgement process.   Do not hand over keys at signup without cleared funds for the bond in full.  Our advice, and that of eezirent’s, is not to accept bond instalments or transfers.  Full bond, upfront or no property.  Simple.

Related posts:

Managing the bond

Managing the vacate process

Diane Bukowski
cloud@eezirent.com.au

When I first started my company eezirent I wrote a small online newsletter for private landlords in Australia. It explored the common problems landlords encounter when self-managing. This simple publication has now grown into Honest Broker.

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