My Tenant Isn't Paying Rent – What Are My Options?

At the core of every lease is a simple promise. But when that promise is broken and you have a tenant not paying rent, it causes real financial and emotional stress.

With lease disputes on the rise across NSW, you need clarity, not complexity. We'll walk you through your legal rights as a commercial or residential landlord, the crucial first steps to take, and the formal actions you can pursue if the issue isn't resolved.

Understanding Your Tenant's Obligations Under a Lease

The duty to pay rent is the most fundamental term in any lease. A failure to pay on time is a breach of the agreement. While this is true for all tenancies, the rules for dealing with it differ significantly:

• Commercial & Retail Leases: These are primarily governed by the lease document itself and broader property law, like the Retail Leases Act. The process for handling a non-payment of rent is often detailed in the contract.
• Residential Leases: These are strictly regulated by the Residential Tenancies Act to protect tenants. Landlords must follow a precise, state-mandated process. There is no room for error.

First Steps When Rent Isn't Paid

Before you escalate, a clear and calm process is your best friend. Acting too quickly or emotionally can weaken your legal position.

Open Communication (and Document It)

Your first move should be a professional conversation. A simple phone call or a polite email can often resolve an oversight. You might discuss a short-term payment plan, but choose your words carefully.

Document everything. A quick note of your call (date, time, and what was agreed) can be invaluable. And if you offer a payment plan, put it in writing and state clearly that you are not waiving your rights under the lease.

Issue a Formal Breach Letter

If a conversation doesn't work, it's time for a formal breach notice. This is a critical legal document and must contain the following key details:

• The tenant's name and the property address.
• A clear statement that the lease has been breached.
• The exact amount of rent owed.
• A firm deadline to pay the outstanding amount.
• A warning about the next steps, such as termination, if the deadline is missed.

Allow the Right Amount of Time to Fix It

This step is non-negotiable. You must give the tenant a legally compliant period to pay the rent:

• For residential tenancies in NSW, this is a minimum of 14 days.
• For commercial tenancies, the timeframe is usually set out in the lease itself.

Always follow the timeline exactly. Getting this step wrong can expose you to compensation claims later.

Legal Avenues If Rent Is Still Not Paid

If the breach notice is ignored, you have clear legal pathways to enforce your rights.

Mediation or Tribunal Orders

State-based tribunals like the NSW Civil & Administrative Tribunal (NCAT) are set up to resolve these disputes quickly and cost-effectively. You can apply to the tribunal for legally binding orders that force the tenant to:

• Pay the outstanding rent.
• Vacate the property by a specific date.

Completing this process requires careful preparation. For complex or high-value commercial disputes, our Litigation & Disputes team provides the expert guidance necessary to secure a favourable outcome.

Lease Termination and Taking Possession

Terminating a lease is a final, serious step. The case of Charlie Bridge Street v Petrazzuolo offers a valuable lesson for commercial landlords.

The landlord's lease required 14 days' notice for any breach. But when the tenant didn't pay rent, the landlord changed the locks after just four days. The Tribunal sided with the landlord, confirming that a specific part of the law (s129(8) of the Conveyancing Act) overrides the lease contract for non-payment of rent. In simple terms, the law says the usual notice rules don't apply to a failure to pay rent.

The key takeaway: Legislation trumps what's written in your lease.

Penalties and Legal Consequences by State

The rules for residential tenancies vary significantly between states. Following the wrong process can lead to serious penalties, including being ordered to pay your tenant compensation.

Here is a simplified comparison for residential tenancies:

This table is a general guide only. Commercial lease rules differ and laws can change.

When Can a Landlord Retake Possession?

Most leases include a "right of re-entry," which allows a landlord to take back their property if the tenant breaches the agreement.

This right is not a blank cheque. You can only retake possession after you have followed the correct legal process; issuing the right notices and, in many cases, getting an order from a tribunal or court.

Changing the locks without following due process is an illegal eviction.

Tips to Avoid Future Non-Payment Issues

Prevention is often far simpler than legal recovery. To protect your investment:

• Screen tenants thoroughly: Check references, rental history, and financial stability.
• Secure your position: Always take a full rental bond or, for commercial leases, a bank guarantee.
• Draft a strong lease: Make sure it has clear clauses on late fees and breach procedures.
• Use a professional property manager: They can manage compliance and handle day-to-day issues.

When to Seek Legal Advice

It's time to call a lawyer when the situation becomes serious. Look for these red flags:

• The tenant ignores formal notices or refuses to communicate.
• The unpaid rent is becoming substantial.
• The tenant is a company that might be insolvent.
• Your lease contains complex or ambiguous clauses.

Dealing with a tenant not paying rent requires a calm, strategic, and legally compliant approach.

As Greater Western Sydney's leading commercial property lawyers, we can help you move forward with confidence. Contact Us today to speak with our team.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.