Dishonoured rental payments fast facts

As property managers, it would be extremely rare to never have a tenant fall behind on rent. I'm sure we could all write a novel stuffed with the excuses we've heard about late rent payments. While it can humour us in the moment, the reality is property managers need to treat dishonoured payments seriously. If we don't, we're failing to meet the requirements outlined in the Agents Financial & Administrations Act.

Q: What constitutes a dishonoured rental payment?

A: For clarity, a dishonoured rental payment occurs when a rental payment made by a tenant bounces in the trust account. This typically happens when a tenant's account has been debited for rent but there are insufficient funds for the transaction to occur.

Q: When does a dishonoured rental payment become a problem?

A: Some financial institutions and payment gateway systems will show the money on the agency's side even though the payment has technically defaulted. This becomes a problem for property managers when running end-of-month processes, which means payments can then be made to a landlord's trust account using rental funds that technically don't exist. This ultimately leads to massive breaches in their audit. Why? By disbursing funds that aren't there, a landlord's ledger will go into negative.

Q: How can agencies mitigate the risk of the landlords ledger going into the negatives?

A: To prevent the risk of this happening, agencies can set up a strategy to either hold those funds until they're cleared or speak to their trust account provider to see if they can turn on a three-day clearance rule in the back-end of the software. This will avoid rejected payments being sent to landlords and uncleared rent payments will instead show on their end-of-month statement.

Q: How can property managers avoid disputes if a tenant is late to pay their rent?

A: To avoid potential disputes, explain to your client(s) why they're unable to receive those funds until the next scheduled disbursement. It's also important to have an open and honest communication with the tenant about why their rent is late. More often than not, it's just a simple misunderstanding - maybe the tenant has forgotten about other bills coming out of their account or they haven't been paid yet because of a public holiday? Whatever the reason, speaking to your tenant with respect and understanding is likely to mean they're willing to pay their arrears in a timely fashion, which is a win for all parties involved.

Property managers - do you have more questions? Email pmsupport@reiq.com.au or call 3249 7347 to speak to a member of our Property Management Support Service team.

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