Released every month our debt collection blog contains news, stories and tips to keep you informed.
With many consumers facing financial difficulty we are seeing more enquiries regarding the collection of rental arrears. With investment properties sometimes forming a large part of a families income and many pensioners relying on this income to fund their retirement it is important to take early action to minimise any potential loss.
The Reason for Rental Arrears
Like most referrals to our office the reasons vary however typically rental arrears is primarily due to the tenant losing his or her employment, an increase in the cost of living, a reduction in work hours or a change from full-time to part-time employment or some other unforeseen event.
The law varies from State to State however a tenant must usually be more than 7 days in arrears before any kind of demand for payment can be made. The correct documentation must also be issued which advises the tenant of the arrears outstanding and asking when payment can be expected.
Can I Help The Tenant?
Yes and this is often the ideal solution.
Agreeing to a tenant making increased repayments to clear the arrears can sometimes work out better for both parties in the long term as you do not need to find a new tenant and there is every possibility the arrears will be paid without the tenant vacating the property and owing you money. There are also a number of organisations that a tenant may seek assistance from if they need support. These include:
- Tenants NSW
- Tenants QLD
- Tenants Union of Victoria
- Tenants' Advice Service (ACT)
- Tenancy WA
- Office of Consumer & Business Services (SA)
- The Tenants' Union of Tasmania
- Consumers Affairs NT
Issuing a Breach Notice
Any Breach Notice must be issued in accordance with the relevant State legislation. You should make enquiries with your relevant tenancy tribunal as this varies around Australia.
Terminating the Tenancy
Termination of the tenancy should be the very last resort. If you have been unsuccessful in coming to an agreeable resolution a process must be followed which again varies from State to State. Locking tenants out of the property however without an Order from a Court or Tribunal is illegal.
Generally speaking the issue of a non-payment termination notice in writing does not officially end a tenancy. The tenancy is only officially ended once the tenants have vacated the property and the keys returned. If the tenant refuses you may have to look at commencing proceedings in the Court or through your relevant Tribunal.
Avoiding Future Issues
Clear communication and screening your tenants is the best way to avoid rental arrears and eviction. Ensure that any potential tenants are reference checked carefully, previous rental payment history is considered and enquiries made with employers to verify a tenants employment status and income. Where possible we also recommend that rental payments are made by direct debit on the tenants designated pay day to ensure prompt payment.
There has been some anxious times recently for body corporates who have been eagerly awaiting the decision in the Queensland Court of Appeal in Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 v Superior Stairs & Joinery Pty Ltd  QCA 173.
In the District Court the Defendant, Superior Stairs & Joinery Pty Ltd (STJ) argued that the action by the Plaintiff, Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 (Body Corporate), should be struck out after action was taken for the recovery of unpaid levies, recovery costs and penalty sums on the basis that the proceedings were commenced outside of the limitation period. STJ arguies that the limitation period for bringing body corporate debt recovery action was contained in Section 145 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (QLD) -
Part 4 Payment and Enforcement of Body Corporate Debts
s145 Payment and Recoery of Body Corporate Debts
(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt -
(a): the amount of the contribution or instalment;
(b) any penalty for not paying the contribution or instalment;
(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.
(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.
STJ successfully argued in the District Court that the time limit for recovery of a debt by the body corporate was 2 years and 2 months pursuant to s145(2) however the Body Corporate submitted at the time that the time limit was 6 years from the date the levy became due and payable pursuant to Section 10 of the Limitations of Actions Act 1974 (QLD).
The District Court agreed with STJ at the time however on appeal, the Court of Appeal, overturned the District Courts decision. In the decision Justice McMurdo, Justice Mullins and Justice Bond stated that the issue raised on appeal was not that of conflicting limitation periods but whether or not s145 prescribes a limitation period. The Justices concluded that s145 is to compel a body corporate to commence proceedings but cannot be interpreted as a limitation period and therefore s10 of the Limitiation of Actions Act is the governing legislation (ie 6 years from the date the contribution becomes outstanding).