What strategies can landlords adopt when dealing with Rent Arrears?
Property Management
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Property Management
Out of the 4,387 landlord applications to the Tenancy Tribunal in Q4 2022, over 75% of these applications were for rent arrears. Step back to the same period in 2021; landlords only made 2,900 applications to the Tenancy Tribunal. 72% were for rent arrears. This is a significant increase.
As the cost of living impacts us all, many landlords will likely want more rent to cover increased costs, such as rising interest rates. The issue here is that more pressure will also be placed on tenants. If New Zealand goes into recession and we see a slowdown in the economy, unemployment could increase. Along with rising costs in power, fuel and groceries, there is an increasing probability that we will continue to see tenants defaulting on rents.
What strategies can landlords adopt when dealing with such issues?
If a tenant defaults on rent payments, you must act quickly and decisively. Ensure that you are constantly monitoring rent payments so that if a tenant falls behind, you can contact them immediately. When communicating, be firm, fair and empathetic. Do not take an accusatory stance. Provide your tenant with an opportunity to provide you with an explanation.
At Property Brokers, we work on a zero-tolerance policy. This does not mean we want to evict people; simply that our policy is the determining factor, not the Property Manager. Every tenant will be notified of the breach with a 14-day notice within five working days of the missed payment, and we must apply to the Tenancy Tribunal by the seventh working day. This starts a process that ensures that our landlords have protection, as waiting for a date with the Tribunal can take up to six weeks.
If an application is left too late, the tenants may accrue a debt so large that they simply cannot pay it off. And, if the tenancy is terminated, the prospect of getting the property returned in a reasonably clean condition is unlikely. By applying to Tribunal early, you are in a position where you have greater control of the situation. You can come to an arrangement with the tenant before the debt becomes too big, and your arrangement can be written up on a mediated order using the Tenancy Services meditation service. You may also obtain a consequential clause that means the tenancy can end if the tenant dishonours the agreement.
Once sealed by a Tenancy Tribunal adjudicator, the mediated order is an official order of the Tribunal and can be enforced.
One thing I would suggest to landlords is to be realistic regarding what a tenant can pay extra on top of their rent. Listen to the tenant and ascertain what they can afford to pay to clear the debt. If you are too demanding, the tenant will once again default. If you are too lenient, you could wait months for the tenant to clear their arrears.
Ensure all communication is clearly documented, so all parties fully understand what has been negotiated. And finally, keep your emotions in check. The chances of resolving the dispute amicably reduce the minute you lose your temper.
Get a Property Manager!
If all of this sounds too complicated, why not leave it to a qualified property manager?
Being a landlord is increasingly complex and far more time-consuming than people realise. Throw rent arrears into the mix, and it becomes increasingly emotive. Most of us are time-poor, living busy lives. Here at Property Brokers, we guarantee our service. One of our three service guarantees focuses on rent arrears. We back our process, and with over $150 million of rent collected annually, there are few more experienced at collecting rent than Property Brokers. We take worry and emotion out of the equation if you leave it to us.
[1] Tenancy Services Dispute Resolution Statistics 1st October 2022 to 31st December 2022
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