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Monitoring rent payments and legal requirements when rent is in arrears
Reducing the chance of rent arrears begins with an effective Tenant Selection Process. Landlords must also monitor rent receipts every day that rent is due. Professional property managers usually reconcile rent payments every day as tenants pay on different days. Although some landlords require tenants to be weekly or fortnightly in advance, a rent is not deemed to be in arrears until a tenant’s paid-to date has been reached. For example, if your tenant is paid until today he won’t be in arrears until tomorrow. If your tenant misses a rent payment then this constitutes a breach of the tenancy agreement and you should notify them straight away. This can be done by phone, text, or email. Sometimes missed payments can have a genuine excuse such as misunderstanding or payment/bank error. A written notice of the breach should be issued in the form of a '14 day notice'. This notice requires the tenant to pay the arrears within 14 days. Issuing this notice is a requirement of the Residential Tenancies Act if you want to take action through the Tenancy Tribunal to recover the rent arrears. If your tenant is less than 21 days in arrears and a '14 day notice' has been issued, a landlord can make an application (under Section 56 of the Residential Tenancies Act—RTA) to the Tenancy Tribunal to recover the arrears. Applications can include a request for the termination of the tenancy and the refund of the bond to cover any arrears. All applications are sent to mediation first which is an opportunity for both parties to come to an agreement to remedy the arrears. The mediation can be done by phone and is only scheduled after the expiry of the previously issued '14 day notice'. If the tenant is no longer in arrears on this date then the landlord has nothing to pursue and there is nothing to mediate. If both parties are able to make an agreement at mediation then this can be witnessed by a mediator and involve a date to pay the arrears, or a weekly payment plan. It may also include a consequential clause which will state the consequences if the agreement (mediated order) is breached. Once the mediator has witnessed an agreement it is sent to the Tenancy Tribunal where it is sealed by the Tribunal as a legally binding and enforceable court order. It can be used to apply for a bailiff to carry out an eviction. If an agreement can not be made at mediation (or a party does not turn up) then the file is sent to the Tenancy Tribunal where an adjudicator will hear the matter. It is worth noting that under Section 56 of the RTA the landlord has the right to seek rent arrears and termination of the tenancy, but the Tenancy Tribunal has the power to let a tenant stay if they are compelled. This can happen if the tenant has just remedied the arrears, has a genuine excuse or provides a repayment plan satisfactory to them. If your tenant is more than 21 days in arrears then you can make an application to the Tenancy Tribunal under Section 55 of the RTA. Although applications to the Tribunal should generally be made under Section 56 (to ensure an earlier mediation/hearing and reduce the amount of arrears), making an application under Section 55 is another option. Under this section of the Act there is no need for a 14 day notice to expire and the landlord has the right to seek termination of the tenancy as well as recovery of arrears and refund of the bond. Unlike Section 56, if the tenant is more than 21 days in arrears on the date of application then the landlord has the right to seek termination. A landlord is expected to be prepared with copies of all documents that relate to the tenancy including agreements, notices and rent ledgers. Failure to provide these may result in delays and adjournments. Once a landlord has obtained a Tenancy Tribunal order for termination of a tenancy then you can use this to apply for an eviction if a tenant is still in occupation. This involves an application to the District Court and can take a further 2-7 days for an eviction date. During an eviction a locksmith needs to attend to ensure that locks are changed and the tenant can’t return without you. In order to gain maximum protection it is essential that landlords have a proactive system in place to deal with rent arrears. If you engage a specialist property manager then you should ensure that they not only have experience in tenancy law but also communication skills. Remember that property is a people business and you are dealing with peoples emotions, and an efficient property manager will help navigate what can be a long-winded and difficult process. Allen Realty is a 100% specialist Auckland Residential Property Management company with a growing network of local branches in Mt Eden, Auckland CBD, Greenlane and Manukau. Visit www.allenrealty.co.nz for information on our services or email simonallen@allenrealty.co.nz for more information. You can read other recent blogs including Negotiating Tenancies, The Tenant Selection Process, The Art of the Rent Review, Smoke Alarms in Rental Properties, A Landlord's Preparation for Winter, Reduce Moisture—Reduce Vacancies, Low Maintenance Gardens in Rental Properties and How Many Tenants on an Agreement?
Simon Allen | Allen Realty Ltd
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The monitoring of rent payments is a crucial part of any effective property management system. Not only is it a requirement of all landlords to keep detailed records, but the efficient recording of rents reduces the risk of rent arrears. Rent arrears are often the main reason behind applications to the Tenancy Tribunal to terminate tenancies.