The lease is signed, your tenants are in, but the rent money isn’t? Rent arrears are a common issue for many landlords that when noticed quick can be remedied even faster. If your tenant hasn’t paid rent, you need to have a plan in place to get it all up-to-date, and you need to know your options.
When you search New Zealand Tenancy Tribunal orders from the past year, rent arrears shows 8338 results. This works out to be about 23 cases every day from September 2019 to September 2020.
As a landlord, you do need to prepare yourself for the possibility of rent arrears and a plan for what to do if this does happen. While a 14-day notice to remedy is one of your next steps if rent is in arrears, here are some other options and things to remember if your tenant hasn’t paid rent.
First things first…
Get in contact with them
If you open your online banking app to see rent hasn’t been paid, the first thing to do is contact your tenant. If this is the first time this has happened then it’s worth flicking your tenant a message or giving them a call to ask what’s going on. It might simply be a case of a slow bank transfer, or they may have genuinely forgotten.
Reach out to your tenant, let them know about the situation. Ask them when they can get rent paid. If there’s no response after a day or two, follow up with another message that says:
- How much rent is owed
- What their responsibilities are on the lease
- What happens next if rent is not paid
Tip: Always ask your tenant what the best way to communicate with them is before you start the tenancy. That way you’ll know how to reach them if you ever encounter an issue with arrears.
Alternative payment plan
If your tenant replies with a reasonable excuse as to why they can’t pay rent, you could propose a payment plan. A payment plan is when a landlord provides extra time for the tenant to pay rent. It does not reduce the rent amount or take away the tenant’s liability.
It is simply a plan worked out between you and your tenant that delays rent payments. While you will have to trust that the tenant will follow the payment plan, you need to have the agreement in writing.
In this agreement, remember to state that if the tenancy ends earlier the tenant is still liable to pay everything in full. Also include the rent amount details and the dates for when it starts and ends. Store this in a safe place and make sure it has both your signature and the tenants.
With Covid-19 causing job losses, rent arrears is a very real issue for some landlords and tenants. If your tenant is in a situation where rent assistance is needed, send them in the direction of help. Below are some of the rent assistance options available:
14-day notice to remedy
Sending your tenant a letter via email or the post is the next step you want to take. Remember that the letter can only be through email if their email address is on the tenancy agreement in order to know that they would receive the message.
In the letter, you want to:
- State the breach by the tenant (unpaid rent) and
- What they can do to remedy this (what options there are for repaying this).
You then need to state that if the issue is not remedied within 14 days, or if you do not hear a response within 14 days, the matter will be taken to the Tenancy Tribunal.
It is important to send this letter as soon as possible. This is because the longer you leave it, the longer you will have to wait to take the issue to the Tribunal, and in these situations time equals money.
To write your 14-day notice to remedy, you can use the 14-day notice to remedy template created by Tenancy Services.
FastTrack Resolution is a service provided by Tenancy Services. It is very much a self-resolution based service and it is a lot less stressful than having to go to the Tenancy Tribunal.
This response is suitable if you and your tenant come to your own resolution of repaying rent without the need for a mediator. Basically you need to create an agreement with your tenant that outlines:
- the outstanding rent amount
- details of how this amount will be repaid
- the date repayments will start, and
- the consequences if any payments are missed.
Then once you have told your tenant that the agreement will be formalised by FastTrack you can do this by sending it here.
Remember to include contact details for your tenant so the mediator can contact them to ensure they understand and agree to all of the conditions. Once they do the mediator will go ahead and record the agreement and notify parties that it has been formalised. This means you now have an enforceable and legally binding agreement without needing to go through the mediation process that the Tenancy Tribunal option would entail. For more information about FastTrack, see here.
If you are unable to sort the issue out among yourselves and the 14-day notice is up, it’s time to take it to the Tenancy Tribunal.
Here a mediator will help to find a fair and legal solution that may involve the tenant paying rent as usual plus a little extra until the late rent is remedied. If the tenant breaches this ruling then the tenancy may be ended. To find out how to file a case with the Tenancy Tribunal, see here.
If your tenant is 21 days (3 weeks) behind on rent and:
- you haven’t been to the Tenancy Tribunal
- you are not prepared to keep chasing them
then it’s worth thinking about eviction. This obviously is not the ideal outcome for any landlord but if your tenants aren’t paying rent then you are losing money. In order to lawfully evict tenants in this case, you will need to:
- Contact the Tenancy Tribunal and
- Apply to have your tenants evicted.
You cannot evict tenants yourself. For more information on the eviction process, see here.