Renting out residential property is a great way to make some extra money, pay your mortgage off faster and build an investment nest egg. It can cause real frustration, however, when your tenant fails to pay rent on time. What are your rights when your tenants don’t pay up?
To avoid costly delays, you should know the steps to take that will allow early intervention to either get the rent payments back on track or to bring the tenancy to an end.
Early intervention is key when it comes to dealing with rent payment problems. Your tenancy agreement should clearly state how rent is to be paid and when. You should also keep and monitor rent records so you will know straight away if your tenant falls behind in payments. If your tenant does miss a payment the first step is to contact them to find out the reason for that missed payment and to make a payment plan. If your tenant doesn’t pay the overdue rent, below is a guide to help fix the problem.
You can send a letter via email (if the email address is listed on the tenancy agreement) notifying your tenant that they have 14 days to pay the overdue rent (this is known as a 14-day notice to remedy). If you have the read receipt setting on, you will receive confirmation that the email has been opened.
Further steps you can take
If your tenant doesn’t pay after receiving a 14-day notice to remedy, or if they are more than 21 days behind in rent, you can apply to the Tenancy Tribunal for a mediation between you and your tenant.
If an agreement is reached to repay the overdue rent, a mediator’s order documenting the discussions will be issued. You can request for the order to be ‘sealed’, which means you can enforce it through the Ministry of Justice enforcement process if your tenant doesn’t follow the terms of the order.
If an agreement cannot be reached at mediation, the matter may be referred to a hearing. An adjudicator will hear the case and consider factors including the reasons for the missed payments, your tenant’s financial position and whether your tenant will repay their overdue rent before making an order. The order either set out the terms of your tenant’s repayment obligations and/or be for a possession order for your tenant’s eviction.
The FastTrack Resolution is a slightly different process which suits situations where you and your tenant make your own agreement about repaying the overdue rent, without the assistance of a mediator.
You can apply online to have your agreement formalised through the FastTrack Resolution provided the agreement records the amount of rent that is outstanding, details of how the outstanding rent will be repaid, the date repayments will begin and the consequences if any payments are missed. You will also need to notify your tenant that you are applying to have the agreement formalised through FastTrack.
On receiving your application, a mediator will contact your tenant to ensure they understand and agree to all conditions of the agreement. The mediator will then record the agreement in a mediator’s order and notify the parties that it has been formalised.
The advantage of the FastTrack Resolution process is that it allows landlords and tenants to make their own agreement and have it formally recorded as a binding and enforceable agreement without having to attend mediation.
What if my tenant breaches an order?
If your tenant doesn’t follow an order made by a mediator or the Tenancy Tribunal, you can get your order enforced through the Collections Unit of the Ministry of Justice. Where your tenant doesn’t follow an order to repay their overdue rent, you can apply for an attachment order. Attachment orders require your tenant’s employer to deduct a specified amount from their wages and pay that amount directly to you.
Failing to vacate your property?
Ultimately you can apply for a possession order that requires your tenant to vacate the property, If your tenant won’t vacate your property after being ordered to do so, you can apply for an eviction warrant. If successful, this will enable a court bailiff to return possession of the property to you.
Don’t let the stress get to you!
It can be incredibly frustrating to chase up overdue rent. However it doesn’t need to cause you endless stress and worry. If you have to deal with tenants who won’t pay their rent, it’s easy to follow this relatively straightforward procedure. Essentially it all comes down to ‘pay up or leave the property’.
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Copyright, NZ LAW Limited, 2016. Editor - Adrienne Olsen, e. email@example.com p. 029 286 3650