How landlords can help tenants struggling to pay rent

It’s an issue that’s likely only to become more common for investors: tenants contacting them, or their property managers, saying they’re unable to pay their rent that week.

At a time when house and unit rents have hit a record high, after the strongest annual growth in 14 years for houses and 15 years for units, many tenants are struggling.

Brisbane rents soared the most out of all capitals, up 16.9 per cent over the year for houses and 12.5 per cent for units, according to the Domain Rent Report for the June quarter.

“We’ve reached this pressure point where many tenants are paying 40 to 50 per cent of their wages in rent,” says Ben Pretty, co-founder of RentRabbit, a kind of TripAdvisor for rentals.

“So, a big proportion of them are facing difficulty.

“And while, of course, property owners need their rent to be paid, it makes sense to have some flexibility. The cost of finding a new tenant could easily outweigh the inconvenience of a week or two of missed rent from a good tenant who’s maybe been renting from you for a while.”

There could be all sorts of problems behind a renter’s inability to pay, from losing their job to being given fewer hours of casual work, from illness to family problems, or simply being unable to cope with the rapidly rising cost of living.

It’s therefore critical for the landlord or agent to talk to the tenant to discuss what’s wrong and to potentially work out a solution.

“You need to talk it through and understand why they’re in this situation and what’s happening,” says Kasey McDonald, head of leasing at property management agency Different.

“Then you can maybe ask how much they can afford to pay, how long the problem might last, and work out a payment plan.

“Alternatively, if they really can’t afford the rent, then you might be able to suggest they get someone in to share with them, or find somewhere cheaper. It’s always important to show empathy and support. They might have been a good tenant, and no one wants to see anyone kicked out onto the street.”

From a tenant’s point of view, there may be pain, anxiety and intense embarrassment but lawyers for Tenants Victoria, for instance, always advise renters to initiate contact with the landlord or agent if they’re in difficulty.

Although recent changes to rental laws in Victoria have strengthened tenants’ rights, and tribunals can adjourn evictions while they undertake financial counselling, it’s in no one’s interests to see disputes escalate.

“In this turbulent COVID era, Victorian renters have faced many challenges from lost jobs or hours, and sometimes extended periods of illness without the safety net of sick leave or adequate social security,” says Farah Farouque, director of community engagement at Tenants Victoria.

“Many renters coming to us have sought advice from our financial counselling service to deal with ballooning rent arrears following the end of the pandemic eviction moratorium in our state last year.”