Investment property owners who come to us suspecting that there is illegal tenant activity going on in their investment property have usually noticed a few things. Perhaps a peculiar chemical odour or a sudden spike in utility bills. They might even be wondering if the tenants actually live on the property!

Either way, you find yourself in a sticky situation where it's hard to confirm if there is actually illegal activity in the new rental or if you need to evict your tenant.

Illegal tenant activity is sticky. In addition to the hours of necessary paperwork, it often costs landlords tens of thousands of dollars in damage repairs.

Luckily, there are ways you can protect yourself against tenant illegal activity and the damage it can cause.

In this article, we’ve highlighted the steps you can take to confirm if your tenants are using your property for illegal purposes and what to do if they are. We’ve also outlined the best ways you can prevent illegal tenant activity from happening before renting your property out.

Let's go over some textbook definitions first. It's important that you understand the difference between illegal tenant activity and breaches in rental agreements, as a lot of property owners confuse the two.

You might be surprised to hear that dents in your yearly income are not always caused by illegal tenant activity. In fact, most insurance claims landlords make are actually in relation to default on rent payment, which is not illegal tenant activity, but rather a rental agreement breach.

So, what's the distinction?

A breach in the rental agreement basically means that a tenant has not followed the agreed-upon articles that you both signed off on in the tenancy contract. Typical examples of this are:

• Rent arrears
• Tenant subletting on Airbnb
• Making changes to the layout of the rental property, such as knocking down a wall

When breaches in the rental agreement happen, you (the landlord) are entitled to either give the tenant a chance to rectify the mistake or evict them. Whether you need an eviction notice or not depends on how severe the breach is and what state you're in.

If there's a conflict between you and the tenant over the end result, it's typically brought to the Tribunal.

On the other hand, illegal tenant activity is any use of the property that breaks Australian law. Unfortunate, but typical examples of illegal tenant activity include:

• Dealing or growing illegal drugs on the rental property
• Abuse, harassment or domestic violence
• Storing stolen goods on the rental property

Evicting a tenant for illegal activity is well within the rights of a landlord, and in most states, tenants can be evicted without notice in this instance. But, when illegal activity is happening, the police should be involved and they will handle the issue.

So, the main difference between a breach in the rental agreement and illegal activity from a landlord's point of view is that once illegal activity is confirmed, the police need to be notified and will then often manage the situation, while a breach in the rental agreement is a matter between you, the tenant, and the Tribunal if it comes to it.

It goes without saying that you can't contact authorities just on a hunch. If you suspect that your tenant is doing something illegal, such as dealing or growing drugs on your rental property, you need to make a few steps to confirm your suspicion, or until you have reasonable amounts of evidence.

Just make sure that you remain respectful of your tenant's privacy as you go about this. Start by reading up on our breakdown of tenant's rights and responsibilities by state.

Regular inspections of your rental property are usually how you would pick up on suspicious tenant activity. Generally speaking, it's your best and simplest chance to have a good look around.

During your next inspection, here are a few things to look for to confirm illegal tenant activity:

1. Signs that your tenants are actually living at the property, and that it's not being rented out to someone else or used as a storage location.
2. Larger modifications or instalment of fixtures in the property, including changes to piping, electricity boards and wiring, changing of locks and extensive security.
3. Water damage to walls, floorboards and carpets.
4. Items that you would find in a science lab but not a home, like beakers, tubes, gas cylinders, lithium batteries and chemical containers.
5. Large amounts of chemicals like baking soda and paint thinner.
6. Strange chemical odours.
7. Signs of rubbish or vegetation being burnt on the premises.
8. Drastic changes in utility bills.
9. Smoke connector is disconnected or removed.

If you feel uneasy about inspections, consider taking someone with you. If your tenant has threatened you in the past, report the tenant to the police and don't undertake any inspections.

But the thing is, you can't always wait around for the next inspection.

What you can do, is ask the neighbours if they've noticed anything. Ask them how they're getting along with the new tenants and they will usually share anything that has come up. If they make any complaints about the tenant's behaviour or comment on visits at weird times or chemical odours, then you have clear red flags you should take seriously.

Remember to document your observations as meticulously as you can. Take extensive notes and save receipts and utility bills. Keep a record of all of your findings.

If you've confirmed your suspicions or have enough evidence to genuinely suspect that there's illegal activity going on in your rental property, it's time to move forward with the eviction process.

Here are the actions you need to take to evict the illegal tenant and get your property back to appropriate renting standards:

1. Report the tenant to the police. Again, it's really important that you have legitimate evidence to support your suspicion, otherwise, you could get penalised. At this point, don't get in contact with the tenant. If you fear this might put you in danger you can contact authorities anonymously.
2. Notify your insurer. Let them know the situation preemptively to hear how well you're covered and the process that lies ahead for you.
3. Wait until the authorities have reached out to you and if your suspicions were confirmed. They will carry out the eviction process. Make sure you have a written confirmation that the tenant was evicted.
4. Use our new tenant checklist to get your property back to appropriate renting standards. Your landlord insurance should cover most damages or things like forensic cleaning.

If it's a simple breach in the rental agreement then you have reasonable grounds to evict the tenant. Go to our blog article on evicting a tenant and you'll find the step-by-step process with all the resources you need for notice periods, eviction forms and so on.

Essentially, evicting a tenant for illegal activity is very straightforward if it's a criminal offence, even if it isn't covered in the rental agreement. You can still contact the authorities and they will carry out the eviction.

If it isn't actually an illegal activity, like if the tenant is subletting the property on Airbnb, then your hands are essentially tied if you didn't specify that this was not allowed in the contract.

This is why it's so important to have a rigid and professional rental agreement and that you actually go through the process of signing off on it.

Another thing to note is if your landlord insurance covers illegal tenant activity. If it doesn't, then you might be looking at serious out of pocket expenses. Check the fine print of your insurance policy and consider changing insurer or upgrading if it doesn't.

Something you can always do is make preemptive steps and measures to safeguard yourself and your rental property against illegal activity.

Finding the right tenant is the most crucial part of this, so when you're looking for a new tenant is when you have a lot of opportunities to prevent any unwanted behaviour on your rental property in the future.

Use our tenant selection guide to minimise the risk of getting a problem tenant and to prevent unwanted behaviour.

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