Putting Value into Property Management

Property investors, do you ever wish that managing your investment was more profitable and less stressful?
Find out here how that's possible.

Tenant problems: 3 steps to dealing with tenants

1st June 2014
Tenant problems: 3 steps to dealing with tenants.

Tenant problems: 3 steps to dealing with tenants.

Dealing with tenant problems is part and parcel of a landlord or property manager’s job. And it can be a very stressful part of your job – if you let it be!

The key to dealing with tenant problems is:

(a) To gain experience in communicating with tenants, so you become familiar with tenants’ tricks and negotiation tactics; and

(b) Dealing with tenant problems in a systematic manner.

Instead of blowing your top (or counting to 10 to calm down), just count 1-2-3. That’s because there are 3 steps you need to understand when negotiating with tenants over late rent or damage.

Step 1: Understand that it’s their problem – and not your problem

You need to understand that the problem is the tenant’s problem and not your problem.

This is really important because some people (especially in confrontational situations) will try to delegate a problem to some else – i.e. you!

If your tenant application processes are in good order, and the appointed tenant was the best applicant on merit, then your tenant should be managing the problem at the outset and have a proposed solution.

This is the ideal outcome: i.e. the tenant has taken ownership of the problem and is managing it.

However, a rental default situation will test your tenant application processes: you will soon discover if the tenant has any weaknesses.

You may find that the tenant truly believes the stain on the carpet isn’t their responsibility – even though they have owned up to doing it. Similarly, the tenant may argue that repairing a burn on the Formica bench top is the landlord’s responsibility.

You need to be clinically clear in your own mind as to what constitutes damage (accidental or deliberate) and what constitutes a rent default, so that you can communicate this clearly to the tenant. You need to be resolute in your position, because the tenant may try to argue that you are the unreasonable one!

Step 2: Understand the underlying problem

The second step is to truly understand what the tenant’s problem is.

This is about identifying the underlying problem that has affected the tenant’s decision making; not the resulting physical damage or rent arrear that you have become aware of!

The underlying problem for a rent arrear might be that the property is simply at the ceiling of what they can afford. In this situation, even small, unexpected costs can threaten them meeting rent payments.

Many tenant problems relate to a tenant’s income and financial commitments

A good assessment of a tenant’s solvency can be gleaned from the tenancy application where they have to declare their weekly income and financial commitments (e.g. car loan, hire purchase, etc.). You may feel that a tenant’s rent commitment should be no more than 30% of their income; this is an assessment you need to make at the tenant application stage. It should also be crystal clear that a childless couple with combined annual income of $160,000 have a completely different risk profile compared with the family of five (two adults and three children) living on $60,000 p.a.

Payment of a damaged Formica bench top might be delayed simply because the tenant wasn’t aware that it was their responsibility to repair the burnt surface. Or, you may discover that deep down they just didn’t want to pay $400 for the repair. Again you may be discovering something about the tenant’s character that you had previously missed.

If you have a tenant who just does not want to pay for their damage, then you have made a poor choice at the tenant application stage. You need to accept that you made an error, and take steps to resolve this.

How to deal with damage

You may have discovered that the tenant’s car is leaking oil in the garage. You need to point out that the leak needs to be fixed on their car and that an oil drip tray is to be placed on the garage floor under the car. However, the tenant’s first priority is to clean the garage floor with an appropriate concrete cleaner.

The underlying problem here might be that they may have been aware of the oil leak but had simply treated it as a low priority, until someone else raised the issue – i.e. you! Many people believe that if you don’t say anything the problem will go away by itself.

You can strengthen your management processes by ensuring many of these common problems are covered off in your tenancy agreement: “The tenant agrees to keep the garage/carport free from oil drippings and if necessary the tenant agrees to supply and use a drip tray.”

In many instances accidents or damage may not be brought to the landlord’s attention as soon as they should simply because the tenant is uncomfortable or embarrassed about what has happened. The purpose of property inspections is to uncover damage issues that haven’t been reported by the tenant!

Often, a simple discussion between landlord and tenant is all that’s needed to establish what needs to be done and how much it will cost the tenant to remedy. It’s not uncommon for many landlords and property managers to be just as uncomfortable as the tenant about approaching the issue!

This lack of action is reinforced by many landlords and tenants, who believe that the damage can be left until the end of the tenancy. If you leave tenant damage unresolved until the end of the tenancy, you will be on the back foot when negotiating.

Step 3: Understand how you can assist the tenant resolve their problem

The third and final step is for the property manager or landlord to understand how to assist the tenant to resolve their problem. Your number one priority is to look after the property owner’s asset. Remember, the property owner is your client, not your tenant.

Communicating face-to-face with the tenant is by far the best way to resolve matters, whether it’s a late rental payment or a problem caused by damage.

Here are tips on how to manage a late rent payment and how to deal with re-occurring late rent payments.

The best way to deal with damage and other problems is by communicating in a clear and specific manner.

Summary

  • The key to dealing with tenant problems is to gain experience in communicating with tenants, so you become familiar with tenants’ tricks and negotiation tactics
  • Deal with tenant problems in a systematic manner:
    • Step 1: Understand that it’s the tenant’s problem – and not your problem
    • Step 2: Understand the underlying problem
    • Step 3: Understand how you can assist the tenant resolve their problem

 


 

Read more:

For more property management tips, check out our latest property news →