Helping Landlords Reduce the Risk of Missed Rent Payments

Each year, thousands of claims are made for lost rent. One of the main reasons landlords experience this is rent default – when a tenant falls behind on payments and is unable to catch up, leading to the lease being terminated with rent still owing.

Because rent default happens so often, it’s important for landlords to have insurance that covers this. The right policy can help recover some of the money lost when tenants stop paying rent.

It’s reassuring to know that landlord insurance provides a financial buffer if a tenant defaults on rent, but as with most things, prevention is better than cure.

While unexpected situations can still catch out even the most prepared landlord, there are some practical steps they can take to lower the risk of rent arrears overall.

Before the tenant is in the property:

Use a property manager: Collecting rent is one of the key jobs of a property manager. A good one will have solid systems in place to handle payments and deal with any problems quickly and professionally.

Set a fair rent: Right now, the market favours landlords – there aren’t many rentals available, so demand is high, and rents are rising. But setting the rent too high might cause tenants to struggle and fall behind on payments.

Screen tenants carefully: Always check a tenant’s job, references, income, and rental history. In today’s economy, it’s especially important to make sure they can afford the rent and bond. If the rent is more than 30% of their income, they may have trouble paying, especially if something unexpected happens.

Be clear about how rent is paid: Make sure the tenant understands how and when to pay rent. Try to match the payment day to when they get paid and set up direct debit to make it automatic. Offering smaller, more regular payment options might help them manage better too.

Once the tenant has moved in:

Keep track of rent payments: Check payments as soon as they’re due. If rent is late, follow up straight away—it could just be a simple mistake. But if the rent stays unpaid past the legal time limit, make sure to send a formal notice without delay.

Do regular inspections: Visit the property regularly to look for signs the tenant might leave without notice and owing rent—like empty cupboards, packed boxes, or disconnected services. Also watch out if they start avoiding contact.

Build a good relationship: If you keep the lines of communication open, tenants are more likely to tell you early if they’re having trouble. This gives you time to work out a solution before things get worse.

Know what to do if things don’t work out:

If a tenant falls behind on rent and is unable or unwilling to catch up on what they owe, the landlord or property manager must understand and follow the appropriate legal procedures for payment or eviction.

Rent arrears are a situation that neither tenants nor landlords want to face. No landlord or property manager would intentionally lease a property to someone they believe will default on rent, and no honest tenant would agree to a lease if they knew they couldn’t afford to pay.

Unfortunately, unforeseen circumstances can impact a tenant’s ability to pay rent, such as illness, job loss, relationship breakdowns, the death of a partner, or unexpected large expenses. However, landlords and property managers can help minimize the risk of rent default by implementing the strategies mentioned earlier. Additionally, having specialist landlord insurance that covers rent default can provide financial protection in case they encounter issues despite their best efforts.