When the bank comes calling - Repossession of tenanted properties
With the current state of the property market in the Northern Territory, and the expiry of interest-only periods in many mortgages, there are increasing numbers of residential investment properties being repossessed. Managing agents are sometimes caught in the middle when a bank enforces a mortgage over a tenanted property.
Service of default notices
If an owner is interstate, a mortgagee may serve a notice of exercise of power of sale on the managing agent. If you receive any legal notices, you should immediately pass them on to the owner as there are strict time limits for compliance.
Payment of rent
If an owner has failed to comply with a default notice, a mortgagee is entitled to direct an agent or tenant to pay rent to the owner's loan account with the mortgagee, instead of to the account nominated by the owner. Mortgagees are typically happy for the agent to continue managing the property and remit the net rent periodically after the deduction of management fees and any other expenses.
Eviction of tenants
Unlike many other parts of Australia, in the Northern Territory a mortgagee is not automatically entitled to evict a residential tenant to repossess a property. If the tenancy is periodic, the mortgagee can terminate the tenancy by giving the usual 42 days' notice. If the tenancy is for a fixed term, the mortgagee can only terminate the tenancy:
- By applying to the Northern Territory Civil and Administrative Tribunal for an order terminating the tenancy. The Tribunal can only make this order if the total fixed term of the tenancy agreement is 12 months or longer. The Tribunal will always consider the tenant's circumstances in deciding whether to terminate the tenancy and if so how long to allow for the tenant to move out.
- By agreement with the tenant. If the tenant is reliable, the managing agent may offer to place the tenant in another property to facilitate the handover of the property to the mortgagee.
- On the day that the fixed term expires, provided the mortgagee gives 14 days' notice to the tenant.
- If the tenant is in default, in accordance with the normal procedures under the Residential Tenancies Act.
The mortgagee will usually give the agent an opportunity to conduct a final inspection and provide access for any necessary repairs.
For more information please contact:
P +61 8 8943 0470