FIVE TACTICS TO ACHIEVE AND MAINTAIN ZERO ARREARS
Want to achieve and maintain zero per cent arrears in your property management agency? Here are five proactive and practical tactics from Jo-Anne Oliveri.
1 ARREARS POLICY
Implementing an effective arrears policy can help you achieve and maintain zero per cent arrears. In order to be effective, your policy should be should be clear, time-lined and well communicated so all parties understand their responsibilities from the outset.
Take defaulted home loans, for example. As a consumer, if we default on a home loan we know we will receive a breach notice immediately because this is in the bank’s policy, communicated to us at the start of the relationship. In the same way, your property management agency’s arrears policy should be communicated, understood and accepted by your team, property owners and tenants when they are first inducted into your agency; that way all parties are clear on their own and each other’s responsibilities. As a result, an effective and well-communicated arrears policy can help remove the risk of tenants falling into arrears during their tenancy term.
2 ARREARS COMMUNICATION TIMELINE
A proactive and systematic arrears communication timeline can also help you achieve and maintain zero per cent arrears. This timeline should outline who, what, when and how late payment messages are communicated to your property owners and tenants. To make it easy to manage and monitor, your property management trust accounting software should also be automated to communicate defaults, issue breach notices and keep track of every tenant’s history.
For example, an effective arrears communication timeline could look like the following:
Day 3 – Text message: This is a friendly reminder that your rent has not as yet been received, please pay immediately.
Day 5 – Text message: Your rent has still not been received. Please attend to this immediately to ensure you do not receive a registered breach.
Day 7 – Telephone call: Your rent has still not been received. If not paid by today, you will be issued with a formal breach notice tomorrow. Please pay and send confirmation of your payment to avoid breach.
Day 8 – Issue formal breach to tenant (depending on your legislation) and email property owner advising them that their tenant has been issued with breach for non-payment of rent.
Day 15 – Issue termination notice to tenant and phone property owner to advise them that their tenant has been issued with a notice to leave.
Should tenants fail to leave upon expiry of the termination notice, you should then take immediate action to gain a warrant of possession. Never delay! As a result, this proactive and systematic arrears communication timeline and automation process can help you prevent late payments turning into arrears.
3 DAILY TASKS
In order to manage your late payments proactively, be systematic about monitoring your rental payments. Since automated rent payment systems download rental payments in approximately 15 minutes, downloading and receipting rents should be the first task completed every morning. Your property managers’ next time block should then be allocated to processing any late payments immediately. For example, if rents are receipted at 8.30am then your property managers should process late payments at 9am.
As a result, carrying out these tasks
consistently on a day-to-day basis proactively manages your late payments to ensure no tenants fall into arrears.
4 TENANT INDUCTION
When inducting tenants into properties, you must advise them that their full rental payment must be received on or before the due date, as per their Tenancy Agreement, regardless of their personal circumstances. For example, if there are multiple single tenants living in the property, you should inform those tenants that you will not accept individual payments. As there is one Tenancy Agreement, it is your tenants’ responsibility to pool their money into one nominated account from which the rent will be deducted.
Tenants should also be informed that they must take into consideration the delay automated rental payment systems experience from time of payment to time of receipt, which is usually three days. Ensuring that your tenants understand their Tenancy Agreement and are aware of how your chosen payment system operates helps you receive rent on time and avoid arrears.
5 ZERO PER CENT ARREARS KPI
Each property manager should have a zero per cent arrears KPI. Implementing such a KPI develops healthy competition at both individual and team levels, regardless of the number of property managers you have. When implementing this tactic, keep in mind that arrears are counted from the time a breach notice is issued under your relevant legislative guidelines (prior to that nonpayment is regarded as a late payment).
Once all individuals achieve this KPI, you should then count the number of days zero per cent arrears are maintained by each individual as well as by the team. Keeping such records of achievement encourages your team to maintain their targets and, as a result, helps you maintain your agency target.
Achieving and maintaining zero per cent arrears therefore requires you to implement a well-communicated arrears policy, follow a systematic arrears communication timeline, carry out daily preventative arrears tasks, induct your tenants, and give each team member a zero per cent arrears KPI.
Implementing these five tactics helps you avoid arrears by proactively managing late payments or, better still, ensuring that rental payments are paid promptly and in full by your tenants each and every time.
YOUR TRUST ACCOUNTING SOFTWARE SHOULD BE AUTOMATED TO COMMUNICATE DEFAULTS, ISSUE BREACH NOTICES AND KEEP TRACK OF HISTORY.
JO-ANNE OLIVERI, CIPS, TRC, Founder and Managing Director of property management business solutions company ireviloution, is an international real estate identity who has trained over 500 agencies and thousands of agency owners and property managers worldwide. Visit ireviloution.com to find out more.