When to apply to Tribunal for Rent Arrears

Here's a useful process to follow for chasing up rent arrears.  It solves the majority of rent arrears issues in the first few steps, but still gives you the security of going to Tenancy Tribunal as quickly as practical so rent arrears don't get too out of hand.

Firstly, I'm going to assume you check rents the day they are due.  If you don't, start doing that now.  Keep forgetting?  Set a reminder up on your calendar to check them.  Never assume the tenant will pay, Sods law will have it that the minute you stop checking will be the minute they stop regular payments.  Some tenants are frustrating in that they don't have an automatic payment (AP) set up, but just pay when they remember to.  Don't put up with this.  Follow the plan below to motivate them to pay the rent in full and on time.

So, you've checked the rent on the day it's due, and it isn't there.  Step one is contact the tenant.  We use email or text on the first day, because the first reminder is usually all that is needed.  Something as simple as 'I notice your rent didn't come in today.  Please make payment immediately' does the trick most of the time.  Don't add 'or tell me if there is a reason why not' - there is no reason good enough.  Maslow says shelter is right up there on the hierarchy of needs, without it, nothing much else matters.  No rent, means no shelter.  Simple. 

Step 2: check the next day if rent came in, or the tenant has told you when they will make payment. If it isn't the next day, have your B-S-ometer on.  No one who doesn't have the rent today has twice as much next week, so don't agree to that.  Instead, ask how much they are short by today, and they should pay the rest of the rent to you immediately.  Sometimes just being $10 short in the bank account stops the rent leaving the account.  So get all but $10 rent now, and they can pay you the extra $10 on top of next weeks rent.  Much more affordable, and the rest of the rent is less likely to disappear too.

If the rent hasn't come on day 2, ring them up if you haven't already spoken to them.  I suggest something like this:  "Hi, your rent didn't come in yesterday and I sent you a text about it, but I see it hasn't come in today either.  Can you get to the bank today and sort this out?  I'm going to send you a 14-day-notice-to-remedy because rent arrears are a serious issue.  If you get it paid today, I'll cancel the 14-day-notice.  Thanks".  Note at no point have we asked why the rent wasn't paid.  Asking 'why' just puts people on the spot and compels them to tell us something that might be intensely private, embarrassing, or paints them in a bad light.  Who wants to do that?  No wonder people lie about rent arrears.  Don't ask, don't make them feel bad.  Guilty people tend to bury their head in the sand, not solve the problem, and you want the problem solved.

So, immediately issue them with a 14-day-notice-to-remedy-rent-arrears, that's step 3.  The funny thing about 14-day-notices is that they are actually for a lot longer than that as you must allow service time.  If you post them, it is another 4 days you need to add on, after the day you send it.  This means the date to remedy the issue may be 19 days away, and you already have a day or two of rent arrears, and worse if day one was Friday, as the weekend will be in there too before day 2 has started.  You can get a sample of a 14-day-notice from Building and Housing Group.

So, the 14-day-notice is out there in the world, now what should you do?  Don't wait around.  We run on the principal that if the tenants have been un-contactable, and they haven't sorted out the rent arrears, we are preparing to apply for Tenancy Tribunal.  If they miss their next rent payment, apply, even though the 14 day notice has not yet expired.

"What?  But I thought I had until the letter expired before I need to pay rent?" says your tenant.  Yes, the missed rent.  The current rent is still due on time.  If they have skipped their next rent payment too, you are pushing your luck to get now two weeks rent arrears paid, especially if they are not trying to keep to their obligations. 

By applying for Tenancy Tribunal early, you shorten your exposure to rent arrears.  Lets say you apply as soon as rent arrears exceed one week.  You potentially have another 14 days to go on the notice to remedy because you issued it on day two.  Tribunal staff receive the application and process it.  This takes around 3 days.  They may schedule mediation, this takes around 2 weeks.  If you don't resolve it in mediation, it will be scheduled for a Tribunal hearing, which takes another 2 weeks or so, if you are lucky and the load is light.  If your tenant hasn't paid any rent in this time, you are now facing rent arrears of 5-6 weeks by the time you reach a hearing.

Now imagine if you hadn't applied for Tribunal at the beginning of the second week of rent arrears, but instead waited until the notice expired.  You issue the 14 day notice on day 3 of the rent arrears, and the end date is 19 days away, bringing you to 22 days arrears.  You apply to Tribunal at this point, which takes 3 days to process, making 25 days, and then you are offered mediation which happens within one week because the arrears are so great, bringing the arrears to 32 days (but could be a week more), but you don't come to an arrangement, so it is put to Tribunal two weeks later, bringing the rent arrears to a whopping 46 days.  At the New Zealand national rent average of $350pw, that is $2300 rent arrears at the time of hearing.  I'm not exaggerating, the average claim at Tribunal is for around this amount.  The adjudicator will give the tenant several days to move out, increasing this amount by the daily rent rate of $50 for every extra day they are in possession.  If they don't leave, you need to get a bailiff to get rid of them, and they require the order to have been sealed for a couple of days before acting.

No tenant I know of who has been evicted for rent arrears feels any need to leave the property clean and tidy with all their possessions and rubbish removed.  They rarely return all keys too.  So, you'll be back to Tribunal to claim for all those things, or you just sigh, and give up.

If you haven't collected the maximum allowable rent of 4 weeks, you are really considerably out of pocket.  Even with 4 weeks rent, you will have some collection to do, and that costs too.  But that is the topic for another blog.

The point of this one, act swiftly on rent arrears.  Don't let them get out of control.  Use all the tools at your disposal.