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‘My tenants cost me thousands’

26 July 2016 Reporter

Darren Leditschke is an experienced investor with many years as a landlord. But when two unpredictable tenants changed their mind about a lease break, it left him fully exposed.

Landlord risks

Darren Leditschke is an experienced investor with many years as a landlord. But when two unpredictable tenants changed their mind about a lease break, it left him fully exposed.

“I started investing in shares when I was 12 and arrived at property investment in my early 20s. I’ve got four properties to my name and some shared properties with my wife. All up, I’ve been a landlord for around 15 years, but the biggest learning curve only manifested at the start of last year.

I’d had two tenants living in my inner Melbourne townhouse. It’s a property that I used to live in myself, but eventually moved out of and started renting. It’s a three-bedroom, two-storey townhouse with a couple of lounges, a couple of bathrooms, a small courtyard and a double garage. I’d call it an executive property. It’s certainly not just one of the many small, lowly appointed townhouses you can find in the inner suburbs.

These two tenants were in there for over a year or so. All was fine. We got along well with them, did a few maintenance things for them and spoke to them every now and then on a social level.

Then they decided to move out. They had to break the lease in order to move out. We went through that process, which was painful in itself owing to the nature of a lease break, but that was only the beginning of my problems.

They had given me a specific vacate date in writing, and I started looking for new tenants as soon as I received this. It was perfectly timed – I managed to find a new tenant who was relocating from Europe and organised his move-in date to fall just a few days after the existing tenants would leave.

I thought I was helping everyone out – allowing the new tenant to move in as soon as possible and reducing the existing tenants’ liability for any associated costs.

However, I discovered that the existing tenants wanted to break the date they had given me. That was the beginning of a whole world of trouble. The biggest problem? The person moving in was relocating from Europe andhe had timed everything down to a tee.

He had timed all of his containers of furniture and motorbikes and stuff to be delivered to the property on the day he was scheduled to move in.

We had to compensate the new tenant because we couldn’t provide the premises that he had a lease for. We had to compensate him for another residence, we had to compensate them for storage, we had to compensate them for a whole lot of things they had a valid claim to, and at the same time we had tenants who just didn’t want to move out anymore.

That’s when we started to get the Victorian Civil and Administrative Tribunal (VCAT) involved. We had three sessions at VCAT and the tenants didn’t turn up to any of them, which is interesting in itself. We had a pretty solid claim to ultimately get them out and we were eventually awarded compensation through VCAT.

That was our first experience with VCAT and if we weren’t self-managing, it would have been a more seamless process, but at the end of the day the outcome was positive.

As it turned out, the tenants ended up leaving shortly afterwards without us having to explore any eviction process further. But the experience served as an incredibly powerful learning tool.

As a result of the debacle, I was given the advice that whenever you receive a request for a tenancy break you should get a warrant to actually enforce the tenants moving out on the date that they originally committed to. What that really means is to go through a process with VCAT to kick them out. That takes 14 days to do. If you prepare for that in advance and anticipate problems, obviously you can almost do that to the day.

I also learned the importance of keeping good records. Get everything in writing. Don’t skimp on things like notice periods and break notifications, and follow all the government forms that are provided to you.

Also, consider engaging a property manager during this time to help you manage the VCAT process. We did consult with some property managers we had relationships with at the time, and they were helpful to an extent. I found that property managers are quite happy to be paid to support you through the VCAT process, even if they haven’t been managing the property for you.

Another perspective that you could take on the situation is that, had the existing tenants come to me and had an adult conversation, we probably could have worked out a solution. Instead, it started to get messy because I effectively had dual leases on the one property – and that was never going to work.”

‘My tenants cost me thousands’
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