If you have done your due diligence, hired a property manager and found a good tenant to live in your property, you shouldn’t have to worry about missed rent payments.

But even the best tenants sometimes fall upon hard times and struggle to make rent repayments. Many landlords jump to evict them as soon as possible, but by doing so they might actually be disadvantaging themselves. Evicting someone is a measure that should only be used as a last resort.

Here’s what you should do if your tenant can’t pay rent:

  1. Ask for proof

If a tenant has lost their main source of income and can’t pay rent, they should be able to prove it. Your property manager should ask your tenants for a letter from their employer stating that they have lost their job or have had their hours reduced, the phone number of their manager so you can verify this letter, and a bank statement proving that they have stopped receiving their wages or salary (tell them to black out their balance and account information.)

  2. Offer a compromise

If they can prove their loss of income, offering a reduction or deferral of rent can ensure that you keep them in the property and won’t have to go through the hassle of finding new tenants. This is what you should do if you have good tenants who have always paid their rent on time.

Here are some common compromises:

- Rent deferral

Offer a rent-free period which will be paid back over time once their salary has been reinstated. You should put a timeframe around this so that you can evict them if they can’t find work.

- Reduced rent

Many tenants won’t want to put themselves in debt if their financial situation is compromised, so they might ask for a rent reduction. This is reasonable as long as you put a time restriction and have your tenant confirm the arrangement in writing. You might offer them 50% rent for three months. Have your property manager draft a document for you, and the tenant to sign so that you are covered if something goes wrong.

-  Rent-free period

If you’re particularly generous, you can offer the tenant a month of zero rent to help them get back on their feet. If you decide to do this, you should ensure that you have the means to make the loan repayment or apply for financial hardship at your bank. They should be able to freeze your loan repayments for 3-6 months which means you won’t be any worse off.

Why keep the tenants in the property?

The reason why it’s better to try keep your tenants in the property is because you might actually come out worse off if you evict them and try and find new ones.

Legally, you can only send an eviction notice on the 15th day of arrears, and then the tenant has another 14 days to vacate the property. If they don’t leave by then, you will have to go to VCAT to get a vacation order and this will give the tenant another 28 days in the property. If they don’t leave again, you’ll have to go back to VCAT and obtain an eviction notice which prolongs the process by another 28 days.

All this time, you won’t receive any rent. Once you finally get your tenant out of the property, you will have to pay the leasing and advertising fees to your property manager and find a new tenant. In a tough market, it can take anywhere from one to four weeks to lease a property so you risk losing another month of rent.

If you must evict your tenant, make sure it is the last resort and you know what you are getting yourself into.