How to issue a breach notice

When a tenant signs a lease, one of the main ‘house rules’ they agree to is to pay their rent – on time and in full. But what happens if they don’t? Read on to find out about rent default, breach notices and landlord insurance.

Chances are you aren’t going to be racing to evict your tenant if they are tardy with one rent payment. Even the most organised and reliable tenant could have a ‘blip’ with their rent. For example, their automatic payments may hit a glitch. But if it’s a situation that is less of a ‘blip’ and more a recurring theme, then you’ll need to act.

Did you know it’s a condition of landlord insurance that the policyholder (or their representative, like a property manager) must act to prevent further loss? And this not only applies to physical damage to the rental but also to rent arrears. So, if the tenant is behind on their rent, there is an obligation to address the issue in a timely manner to prevent any loss of rent claim spiralling. It’s also important to know that the amount of time that an insurer is willing to cover loss of rent is generally capped at a certain number of weeks – rental losses after that point are then usually the responsibility of the landlord. Why are we telling you this? Well, because it pays to take timely action.

That action you need to take will likely be to issue a breach notice for rent default. What exactly is rent default? Rent default is where a tenant fails to pay the agreed rent and is in breach of a signed tenancy agreement. Rent default frequently leads to rent arrears, which is ultimately unpaid rent that has accumulated over time. Why is an insurer telling you all of this? Well, before a landlord can claim for rent arrears, the tenant must have been legally evicted…

Issuing breach notices for rent default

In general, before taking any action against a tenant for non-payment of rent, you must serve them with a written breach notice (or form of notice based on the requirements in your jurisdiction).

A breach notice is a legal document that informs tenants of their obligations and the consequences of not fulfilling them. It outlines the specific regulation that has been breached (e.g. non-payment of rent) and what must be done for the tenant to comply.

The issuing of breach notices is governed by the residential tenancy laws in each state and territory, and the correct procedure must be followed. This includes not issuing a breach notice before the tenant is behind on their rent for the specified number of days:

• Australian Capital Territory – a notice to remedy can be issued once the tenant is seven days in arrears; tenant then has seven days to remedy
• New South Wales – termination notice for non-payment of rent can be issued once the tenant is 14 days in arrears; at least 14 days’ notice to vacate is required
• Northern Territory – a notice to remedy breach of agreement for unpaid rent can be issued once the tenant is 14 days in arrears; tenant must be given at least eight days to remedy
• Queensland – a notice to remedy breach can be issued once the tenant is seven days in arrears; tenant then has seven days to remedy
• South Australia – a notice to remedy a breach can be issued once the tenant is 14 days in arrears; tenant must be given at least seven days to remedy
• Tasmania – a notice to vacate can be issued once the tenant is 14 days in arrears; tenant then has 14 days to remedy
• Victoria – a notice to vacate can be issued once the tenant is 14 days in arrears; tenant has until the termination date in the notice to remedy
• Western Australia – a breach notice for non-payment of rent can be issued once the tenant is one day in arrears; tenant then has 14 days to remedy

The above is a guide only. Always refer to the state/territory legislation or authority for the most up-to-date information.

Once a breach notice has been issued, one of two things could happen.

First, the tenant may catch up on their rent payments. This is great news and hopefully will be the end of the situation. But, if it happens again, the same process should be followed.

The alternative is that the tenant doesn’t catch up on the rent. And then things can get a bit challenging. The next step is likely to be issuing a termination notice (we have a whole article that looks at this) and ending the lease. Again, the rules about doing this are governed by the relevant jurisdiction’s tenancy laws and must be followed to the letter. If notices are not served correctly, the landlord’s case before the tribunal or court can be jeopardised.

Should the tenant refuse to leave the property within the timeframe outlined in the termination notice, the landlord or property manager may be required to apply to the courts for possession of the rental (which could ultimately result in forcible eviction by a sheriff/the police). Again, refer to the tenancy law or authority for details on the procedure.

Claiming for rent default

Once the tenant has vacated, a claim for rent arrears can be lodged. The landlord will need to provide evidence of the loss and the actions taken to remedy the situation. The period for which the loss of rent will be covered is determined by the nature of the claim and the lease agreement in place.

Landlord insurance provides a financial safety net in case something goes wrong. But to make sure the insurance is valid and ensure the landlord can maximise their return when it comes to making a claim, landlords and property managers need to follow the right procedures – if they don’t, any claim could be jeopardised.

If you have gathered from the above that issuing breach notices is complex and challenging, then you have been paying attention. It is not a simple process. If you are a landlord, it can be made easier thanks to a skilled property manager, and, of course, the right landlord insurance. That is where EBM RentCover steps in. If you have questions about breach notices and how it impacts your insurance, ask a member of our Expert Care team for guidance – 1800 661 662.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.