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Tenancy Agreements In Terms Of Debt Collection

Thursday, August 01, 2013

Tenancy Agreements In Terms of Debt Collection

by Craeg Williams 

Choosing the right tenant is not always the easiest process.  Landlords are often in the position of choosing from applicants who are not perfect but will hopefully prove to be adequate.

Once you hace chosen the best applicant on merit, it is time for the background check.

Remember the references they provide may be the only way to track the tenant down if they do end up doing a runner.  It is a common misconception that getting personal references is a waste of time.  This cannot be further from the truth. 

A current landlord and work reference can confirm the applicant's details now, but will not be able to help you track them down in the future.  Family members are one of the best sources for obtaining new phone numbers and addresses.  

Once the background check has been completed the next step in protecting your investment is the tenancy agreement.  The agreement should have a number of provisions that protect your interests rather than those of the tenant.

You should also be aware that not all tenancy agreements have the appropriate protective clauses.  The absence of these clauses may lead to future issues.  Your tenancy agreement should contain an importation clause which states that the completed tenancy application form becomes part of the tenancy agreement, as well as a range of other protective clauses.

The most important clause in terms of debt collection is a 'cost collection clause'.  This states that if there is a collection for outstanding losses then the fees incurred in the collection are to be paid by the tenant/debtor.

Another important provision to have your tenancy agreement is a 'duly authorised agent section'.  If this section is properly completed by the tenant it permits tenancy services to serve the application on the tenant through their duly authorised agent.  This gives you the ability to serve the tenant at this address,even after the two-month deadline the tribunal puts on an address for service.

Your tenancy agreement should also contain clauses specific to the tenancy such as swimming pool or spa pool responsibilities.  Remember water supply charges and carpet care provisions are also important clauses that most agreements do not have.

The other major function of a good tenancy agreement is to gather detailed information about the tenant.  This can be useful later on when a collection is being implemented.  Gathering information such as the tenant's WINZ number and the date of birth are important.

Having a strong agreement sets a high standard from the beginning of the tenancy.  It is important to portray to the tenant that you mean business and expect a high standard of tenant.

Having a professional looking agreement that is designed to protect the landlord is a message in itself when dealing with new tenants.  Tell them the reasons you are not using a standard agreement and how your agreement is different. 

Lastly, be aware of tenancy agreements that have clauses such as right of renewal.  If the tenancy is a fixed term and you forget to cross out the right of renewal clause, you may find yourself with a tenant who has the right to extend the tenancy for another period.  This can be expensive for property managers and landlords.

To download a free Property Investor Tenancy Agreement and see other interesting information visit www.tpscreditcontrol.co.nz.  

Craeg Williams is the Manager of TPS Credit Control and Tenancy Practice Service as well as the APIA Guest Blogger on tenancy management and debt collection.  

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