Dealing with Tenant Defaults and Rent Arrears

Learn how to manage breach notices and arrears in this guide.

Dealing with Tenant Defaults: How to Navigate Breach Notices and Rent Arrears

As a property owner, it is important to understand the law and your legal rights when dealing with tenant defaults. Whether you’re facing rent arrears or a breach notice, taking timely action can help protect your interests. This guide provides an overview of navigating this process step-by-step so that you can handle tenant defaults effectively and efficiently.

What is a Breach Notice?

A breach notice is a legal document that informs tenants of their obligations and the consequences of not fulfilling them. It outlines the specific rule or regulation that has been breached and what must be done for the tenant to comply. Breach notices are important in managing rental properties, as they can help you protect your rights and minimise losses due to defaults. 

In Australia, there are several laws regulating landlord-tenant relationships, including state-specific regulations on issuing breach notices. In general, before taking any action against a tenant for nonpayment of rent or other breaches of the tenancy agreement, you must serve a written breach notice stating the reasons for the breach and demanding that the tenant rectify the breach within a specific period. 

It is also important to document all breaches accurately and maintain clear communication with tenants throughout the process. This will help you promptly address any issues and ensure you comply with legal requirements when issuing breach notices.

Why Should You Document Breaches?

Documenting breaches thoroughly is essential to ensure that your property and rights are protected. Having clear records of all tenant-related activities and communications can help resolve disputes quickly and efficiently. It will also provide evidence if you need to take legal action against a tenant for rent arrears or other violations of the tenancy agreement. 

Here are some of the other benefits of documenting your tenants' breaches:

It allows you to track the progress of your tenant's repayment

Recording breaches helps you monitor the performance of your tenant and ensure that they comply with their obligations under the tenancy agreement. This will give you a better understanding of when to take action if your tenant fails to comply with the lease terms.

It provides proof in case of disputes

Having written records of all breach notices and other communications between yourself and tenants can be invaluable in the event of a dispute. The documentation can help you prove that your tenant was aware of the breach and was allowed to rectify it before legal action was taken. 

It helps protect your rental income

You can ensure tenants are held accountable for any unpaid rent or other violations by keeping accurate records and ensures that your rental income is not adversely affected.

What are Rent Arrears?

Rent arrears refer to unpaid rent that has accumulated over time. This can occur when a tenant has failed to make their required rental payments on time, increasing unpaid rent. 

Rent arrears can have serious financial consequences for tenants and landlords, and failure to address them quickly can lead to additional costs such as late payment charges and court fees. Fortunately, some steps can be taken to help both tenants and landlords manage this difficult situation. 

Before anything else, it's important to let the tenant know about their rent arrears. This should involve clearly communicating the outstanding balance and when it needs to be paid. It's also a good idea for you to understand any exceptional circumstances that may have caused the arrears and work with them to develop a payment plan. 

Of course, this can be a tricky situation for both parties involved. It's always best to approach it in a friendly and understanding manner - no one likes being confronted with bills they can't pay! That said, if there is no effort from the tenant to make a payment or contact the landlord, it may be best to seek advice. 

How to Use Breach Notices to Address Rent Arrears

If a tenant falls behind on their rent payments, a breach notice is the best way to ensure timely and accurate payment. It will clearly outline the details of the breach, including any overdue amounts and payment deadlines.

When tenants miss their rent payment, contact them as soon as possible. It is important to have an open line of communication and be clear about the breach notification process. Explain that a breach notice will be issued if the rent remains unpaid by the due date.

Here's when you can issue a breach notice depending on the state:

  • In the Australian Capital Territory, if your tenant is more than a week behind in rent, you can issue a Notice to Remedy the breach, allowing them 14 days to catch up on their overdue payments.
  • In New South Wales, there is no specific breach notice for rental default. However, it is recommended to inform the tenant as soon as they miss a rent payment and allow them 14 days to catch up on their arrears.
  • In the Northern Territory, if your tenant falls more than two weeks behind in rent, you can issue a Notice (Form RT03) to remedy unpaid rent. This grants them seven days to catch up on their overdue payments.
  • In Queensland, if your tenant is in arrears for more than a week, you can serve them a Notice to Remedy Breach (Form 11) to correct the breach. They will then have seven days to settle the outstanding rent.
  • In South Australia, if your tenant is more than two weeks behind in rent, you can serve them a Notice (Form 2) to rectify the breach of the agreement. They will have a seven-day period to keep their rent payments current.
  • In Tasmania, if your tenant is at least two weeks behind in rent, you can terminate the agreement by issuing a Notice to Vacate. They will be given a 14-day period to settle the outstanding rent.
  • In Victoria, there is no designated breach notice. Nevertheless, it is advisable to promptly notify the tenant upon missing a rent payment and grant them 14 days to rectify their arrears. You can use the Notice of Breach for this.
  • In Western Australia, if your tenant falls behind in rent by more than a day, you can issue a Breach Notice (Form 21) for non-payment of rent. This gives them a 14-day window to make up the overdue payments.

What should a Breach Notice include?

If you have determined that a breach notice is necessary, make sure to include the following information: 

  • The tenant's name and the address of the property 
  • A brief description of why the notice has been issued 
  • A clearly stated deadline for payment 
  • Any additional action that will be taken if their rent remains unpaid after the deadline 

Once the breach notice has been issued, keep a copy for your records and provide the tenant with a written confirmation that they have received it. This will help you protect your rights as a landlord if any issues arise in the future. 

What happens if your tenant catches up on rent?

In most cases, if your tenant pays the overdue rent before the deadline, you must accept it and continue with the tenancy agreement. However, this doesn’t mean that you can't still take further action if they breach their obligations again. 

It is important to know your state's laws on rental arrears and the eviction process. This will help you protect your rights and ensure that any tenancy breaches are handled fairly and reasonably. 

What happens if the tenant breaks the breach notice agreement?

If the tenant fails to comply with the breach notice and does not pay their arrears, then you can take action to terminate their tenancy. You must follow the relevant procedures for your state or territory to do this. 

  • Australian Capital Territory: Should the tenant fail to rectify the breach by the specified date, you can terminate the agreement by issuing a Notice to Vacate. Click here for more information.
  • New South Wales: You can terminate the agreement when the tenant is 14 or more days overdue on rental payments. While there is no specific termination notice, you can use the template provided. The tenant must be given 14 days to vacate the property. For more details, visit NSW Fair Trading.
  • Northern Territory: If the tenant fails to address the breach by the specified date, you can apply to the Northern Territory Civil and Administrative Tribunal (NTCAT) for a termination and possession order.
  • Queensland: Should the tenant fail to rectify the violation by the specified date, you can promptly issue a Form 12 Notice to Leave. This notice grants the tenant seven days to vacate the premises.
  • South Australia: The Notice to Remedy Breach of Agreement (Form 2) that you used to inform the tenant about the violation also serves as the notice for termination. The termination date can be any day after you initially requested the tenant to rectify the breach. Check out SA gov to find out more.
  • Tasmania: Once the tenant is 14 or more days behind in rental payments, you can terminate the agreement by issuing a notice to vacate. The tenant must be given 14 days to move out of the property.
  • Victoria: Once the tenant falls behind by 14 or more days in rental payments, you can promptly terminate the agreement by issuing a Notice to Vacate. This notice grants the tenant seven days to move out of the property.
  • Western Australia: If the tenant does not address the breach by the specified date, you can immediately issue a Form 1A Termination Notice, giving the tenant a seven-day timeframe to vacate the property.

What if the tenant refuses to pay the rent and doesn't leave your property?

If the tenant does not move out by the date listed in the termination notice, you can apply directly to your authority/tribunal for a termination order, ultimately ending the tenancy.

If you request a termination order, it must also come with an order for possession of the property. In many states, applications for a termination and possession order must be made within 14-30 days of the termination date. Make sure to check with your tribunal or authority for the specific timing.

Rent arrears and tenancy breaches are matters that require a swift, assertive response. As a property owner, it is crucial to understand your state's laws and regulations regarding rent arrears and termination of agreements so you can effectively address any issues with tenants. By following the proper steps, you can ensure fairness for both parties while protecting your rights as a property owner.

RentBetter Can Help You Handle Rent Arrears and Breaches

Dealing with rent arrears can be one of the biggest headaches for property owners but with RentBetter, you can bid farewell to chasing your tenant. Our rental payment management system makes it easy to set up automatic payments and track everything – all in one spot. RentBetter will send automatic alerts and notifications to both you and your tenant. It’s peace of mind to ensure nothing is missed and all payments are received on time.

The rental payments dashboard helps you monitor your tenants’  payment history. Payments are tracked, the ledger is automatically updated, and receipts are sent to you and your tenant so you never have to worry about missed payments and you can stop wasting time chasing overdue rent and focus on what matters – running your property with peace of mind!

And Bonus, payments also automatically flow into the reporting feature so you're prepared come tax time.

With RentBetter, you can say “bye-bye” to those frustrating rent arrears for good. So why not give it a try today? You (and your tenants!) won’t regret it! Register for a demo below.