Rent Arrears - information for landlords

When it comes to problems with rent payments, early intervention is the key to sorting it out. As a landlord you need to keep good rent records, and monitor them, so they will know straight away, if rent starts to fall behind.

To support landlords' efforts to intervene early, Tenancy Services has a process that allows an application for help to be made with Tenancy Services, as soon as things start to go wrong. That means that if the problem isn't sorted out, after a tenant has been served with a 10 working day letter to do so, an application to the Tenancy Tribunal can be made immediately. You do not need to wait for the 10 working day letter to expire before making your application. You do need to have served the letter on the tenant

This process is a change from the past, when an application would not be accepted until the 10 working day letter had expired.How and when do I apply?

Application forms are available from Tenancy Services. You can ring to have one sent out to you, or pick one up from one of our offices. It costs $20 to apply. You can apply as soon as your tenant is in arrears, and you have sent them a 10 working day letter to sort it out.

You will need to tell Tenancy Services when your letter expires, and provide a copy of it with your application. You also need to include a copy of the tenancy agreement. You need to tell us how the letter was served - for example, by post or by hand.

Once you have applied, Tenancy Services will send you and your tenant a letter, confirming the application has been made, and inviting you both to attend a mediation meeting to sort out the problem. The mediation will be set on a day after the 10 working day letter expires.

When is rent in arrears?

If your tenant's rent runs out today, it will be in arrears tomorrow. But it will only be one day in arrears, even if your agreement is for rent to be paid two weeks in advance. Rent will be 21 days in arrears in 21 days' time. You cannot count rent in advance that has not been paid as rent arrears.

What you can do yourself about rent arrears?

As soon as your tenant's rent is in arrears you should contact them either by phone, mail or in person and discuss the situation with them. Remember, the sooner you get on to it, the sooner it will be sorted out. It may be that there has been a bank error or a misunderstanding about when rent was due. Most tenants don't want to lose their home and are willing to sort something out to get the rent back on track. It is also helpful if a tenant is made to feel comfortable about discussing possible problems about rent payments before they arise.

If your tenant cannot pay all the rent due, it is better if they are encouraged to pay what they can rather then miss the whole rent payment. If they have missed paying some or all of the rent try suggesting that they pay extra each week to catch up. It may be helpful to put the agreement in writing and both of you sign it. Give your tenant a copy and keep one yourself. If rent is being paid by automatic payment the amount may need to be changed.

It is much harder to sort out missed rent with a tenant once the tenancy has ended so keeping the tenancy going is the best way to collect unpaid rent.

What is a 10 working day letter?

If you can't sort something out with your tenant or have not been able to contact them, send them a letter setting out what the problem is. Ask them to fix it within ten working days and tell them that if this does not happen you will involve Tenancy Services and ask to have the tenancy ended. The Tenancy Services website www.tenancy.govt.nz has an example of a letter you can use.

Personally giving the 10 working day letter to the tenant will speed up the process, but if you are not able to do that, it should be posted as soon as possible. Delaying using a 10 working day letter increases the rent arrears and makes it harder to find a workable solution. Keep a copy of the letter.

Keep on trying to contact your tenant, as there is nothing like the personal touch to get problems sorted out.

What if the tenant pays back the arrears after the application has been made but before the 10 working day letter expires?

You need to let Tenancy Services know as soon as possible, so your mediation appointment can be used for someone else. Once you have made an application, and the $20 fee paid, your fee cannot be refunded, even if the problem is sorted out

The ten working days are up.

When you made your initial application, both you and your tenant would have received a letter from Tenancy Services, inviting you to a mediation meeting. You will need to come to the mediation with your up-to-date rent records, and some thoughts about how the problem can be sorted out.

Possible solutions

There are as many solutions as there are causes but some of the most common are time payment for the arrears, ending the tenancy by agreement, immediate payment in full, or work done in place of the debt.

Once you and your tenant have reached an agreement the mediator can write a legally binding and enforceable order to give effect to your settlement.

If a solution cannot be found, your application may go to the Tenancy Tribunal for a formal Hearing. If a Hearing is needed we will give you information about that.

21 days in arrears?

It is best not to let things get this bad but if they do, you can make an application straight away to terminate the tenancy and Tenancy Services can still help you sort it out.

It is important to remember that you can take action well before the rent ever gets this far behind.

Note: If you have a copy of the Residential Tenancies Act you will notice that section 56 states nothing about the 10 days being up at the time of the application unlike section 55 (1) (a) that states the rent must have been 21 days in arrears at the time of the application.

For many years various courts around the country and various Tenancy adjudicators, and at various times the same Tenancy Adjudicator interpreted section 56 in accordance with this new nation wide direction and interpretation.

Now for those who are getting a bit confused. Here is my advice based on many successful and also many unsuccessful applications to the court using section 56.

You need to make a value judgement on what the problem with the tenant and their non payment of their rent is. For me I perceive the non payment of rent very early into the start of the tenancy as being very ominous. As such all misses of the rent for what ever the given reason with in two or three weeks of the start of the tenancy get a 10 day notice. If the rent is then paid with in say by one week then obviously the problem has been remedied. If the problem has not been fixed by this date then put your application into the tribunal. For those tenancies that seem to be heading down hill fast i.e. like 2 weeks in arrears suddenly appears several months into the tenancy then issue your 10 day notice and get on with the problem. You need to make sure that mediation appointment is scheduled not earlier than the 10 working days from when the notice was given.

Article Provided By

Glenn Morris
Property Manager
Nelson