Property management tip #2 Rent collection and arrears management

[Property Man]

Rent collection and arrears management are a vital part of managing your property. By following these points you will be able to better manage your rent collection and be better prepared when a tenant doesn't pay:

There are several important points with rent collection to help landlords to minimise the likelihood of arrears occurring, and the amount of arrears potentially incurred.

• Always check that rental payments have been made on the due date so you can initiate collection of arrears immediately
• Automatic rent payments deposited directly into your rent account are preferable, and it is best to set up payments to coincide with the date of your tenants personal income payments to reduce the likelihood of missed payments
• Have a zero tolerance policy to arrears and have direct and immediate contact with your tenant in the event of rent payments being missed
• Arrange immediate repayment of arrears (preferably the next day) with your tenant and if repayment is not initiated as agreed start formal proceedings (e.g. issue of 10 day notice) straight away – this way if rent remains unpaid the tenancy bond is likely to cover the arrears incurred if you have to progress to eviction
• Formalise agreements relating to repayment of arrears via a Tenancy Tribunal Mediation or Hearing and enforce Tribunal Orders when necessary to recover arrears
• Lodge Tribunal decisions and 10 day notices with tenant databases such as Tenancy Information NZ (TINZ) to help protect other landlords from suffering the same problem from repeat offenders

By following the points above, you will collect rents on time more often. Rent collection is imperative to the success of a rental property. Learn from your mistakes and improve your rent collection policies as you go. By having a solid foundation to start with you will be better prepared if the time comes when a tenant stops paying.

Regards
Aaron

[Keys]

Hmmmm, having just read that I wonder that anybody doesn't follow those procedures as a matter of common sense. Good for a quick reminder though.

[Property Man]

Hmmmm, having just read that I wonder that anybody doesn't follow those procedures as a matter of common sense. Good for a quick reminder though.

That's right Keys. 'Tips' generally in the property management industry are usually just common sense. While that is the case, it is amazing how often property owners forget to follow them.

Regards
Aaron

[cube]

Thought for the day...

common sense

Instead of considering all the evidence, I just applied some common sense - otherwise known as prejudice - and came up with the totally wrong answer.

- Eric in George's Secret Key to the Universe by Lucy and Stephen Hawking

[talltimber]

Hi,

New to the site and LL but already this topic is of interest as we have inherited bad Tenants from the Vendor.
I issued the 10 day notice, but did not lodge with the TS at the same time. At the end of the 10 days there were still arrears, but while I was working out how to file the application to TS tenant paid arrears on 11th day.
I have an rental agreement stating that rent is due in advance but the tenant pays at the end of the week, but from what I have read I can't ask for an order to enforce that?
Do I have any rights to ask for the advance rent?
Suggested action would be appreciated.

[Keys]

90 day notice and start with a new tenant.

[Property Man]

Hi,

I have an rental agreement stating that rent is due in advance but the tenant pays at the end of the week, but from what I have read I can't ask for an order to enforce that?
Do I have any rights to ask for the advance rent?
Suggested action would be appreciated.

Hi Talltimber,

You are correct in thinking that you can't enforce the issue of the tenant paying at the end of the week, because they are not in arrears.

You have a couple options that come to mind.

1) explain to the tenant that rent is to be due at the start of the week in advance as per the tenancy agreement. If he ignores you issue a 90 day notice if you are not happy with his response.

2) Let the tenant continue paying at the end of the week. If they continue to make payment on time, each and everytime then maybe this is the better option.

Regards,
Aaron

[Keys]

1) explain ..........................
2) Let ............................

Regards,
Aaron

Number two is always the better option. Regular, every week and in time with their pay day. Why hassle them about it?

[essence]

as we have inherited bad Tenants from the Vendor.

Has the rent ever been paid on due date since you've had the property?

I issued the 10 day notice, but did not lodge with the TS at the same time. At the end of the 10 days there were still arrears, but while I was working out how to file the application to TS tenant paid arrears on 11th day.

The tenant obviously knows their "rights" with regard to paying rent. They're laughing at you, knowing that if they pay after 10 days but within 21 days, there's really nothing you can do.

I hope you're KEEPING ACCURATE RENT RECORDS AND SUMMARY (see http://www.dbh.govt.nz/pub-new-tenancy#map7).

I have an rental agreement stating that rent is due in advance but the tenant pays at the end of the week, but from what I have read I can't ask for an order to enforce that?

In NZ, all rent due SHOULD be paid in advance. It may seem obvious, but has the tenant ever been told this?? Most LL's assume that tenants know this, but a lot don't.

Do I have any rights to ask for the advance rent?

Yes, it's called a Tenancy Agreement.

Keep an accurate rental record. If need be, issue the tenant a 10 Day Notice every time they get overdue. When you hand-deliver the notice, be really polite, patient and nice. Explain to the tenant that all rent in NZ is paid in advance and that he agreed to that by signing a tenancy agreement. He'll hate you issuing them all the time but you are within your rights to do so. It also puts a "face" on the person they're not paying rent to.

Don't get into an argument with the tenant.

If you're not happy with this tenant, easy fixed. Issue him with a 90 day Notice to Vacate. DO NOT DISCUSS WITH THE TENANT WHY YOU'VE ISSUED THE NOTICE. If he queries why you've issued it, just say you've been advised not to discuss the matter.

If you're lucky, he'll find somewhere to move into really quick. Expect the rent to stop. Expect damage/dirtiness in the property. Unfortunately (generalisation here!) tenants who don't pay, don't seem to clean either!!

What can happen, is that once a 90 day Notice is issued, tenants stop paying rent. Which oddly enough works in your favour.

Once they miss another rent payment on due date, issue another 10 day Notice to Remedy AS WELL AS lodge a Tenancy Services application. Don't muck around like the last time, just do it. When you put in your application, attach the Rental Summary. This proves that the tenant is consistently late with the rent.

If tenant pays rent late again, don't cancel the Tribunal application. Tenancy Services (TS) will issue you with a Mediation date. I now state on any applications I make, that I don't want to go to Mediation, I wish to go straight to Tribunal. I've still been issued with a Mediation date, I just ring up and say, no I want a Tribunal date. I insist on this. You do not have to go to Mediation.

An interesting thing to note, if any agreement is reached at Mediation it is NOT listed on the http://www.tenancytribunal.govt.nz/ website, then the tenant does not have a history of defaulting etc and other potential LL's don't know how bad a tenant they may be getting.

All Tribunal adjudications are publicly listed on this website.

If you do decide (or are bullied into going to) Mediation, ask for "a consequential clause" which means that if the tenant does or doesn't do xxxxx, then the consequence of that happening is xxxx, ie if the tenant doesn't pay the rent on due date then the tenancy is terminated.

Best case scenario, IMHO, is if the tenant has done a runner. If you are in the general vicinity of the property, do a drive-by to check out whether the place is still occupied. Look for things like curtains continually closed, or mail building up in the letter box, grass is overgrown, or a general air of unlived-in. It won't take long to notice this. Or if you're really diligent, get out of the car and talk to the neighbours. You'd be surprised what neighbours notice. They'll soon tell you whether they've moved out or not.

If you notice the property is vacant, sellotape a 48 hours notice of Inspection to the front door. I was told by TS that just because the property is vacant, "... a LL can't assume that the tenant has done a runner. The tenant may have just moved his furniture out and he'll continue to pay rent". Yeah, right.

If the property is vacant, you can get the property cleaned and re-rented asap, then you can apply to TS for Bond to be released to you, cleaning costs, damages etc etc. Depending on the amount of $'s owed at the end of all this, it may be an exercise in futility chasing the tenant. You will however have gotten rid of a bad tenant.

Going to TS and having an adjudication against the tenant, only does one thing - the adjudication is publicly listed, so that in future the ex-tenant may have problems getting another property. Doesn't help you, I know but there is some benefit in exposing a recidivist defaulter.

Or, if you want the continual hassle, put up with him being continually late with his rent.

Your choice.

Welcome to the world of landlording!!

[essence]

Missed a point. If the tenant vacates and doesn't return the keys, you can also claim for getting new locks installed.

You won't get the money back but it will increase the debt the ex-tenant owes you.

If by some miraculous chance, some day in the future the ex-tenant feels guilty, he may ring you up and decide to pay you the full amount.

Pigs will also fly.

[Keys]

In addition. After three 10 day letters for late rent make an application for termination for continual breaches of Section 40 (1a). You are not applying for termination due to rent arrears (cough) you are applying for termination due to continual breaches of the Act.

[talltimber]

Thanks Essence & PropertyMan, your comments are very helpful.

No the tenant has only been late, or since the 10 day notice, at the end of the week (still late but not so late).
I have kept records, but not as clear as the link. Thanks I will now use this as is spells out things very clearly.
I have been worrying about if they will pay or not, however will relax and assume payment arrives at the end of the week, if not will follow your approach to issue TS and follow through this time.
Can TS issue termination order? if so what sort of notice would they give for a repeat late payer with a couple of 10 day notices?

I see that I have failed on the reference check steps and need to start researching that next as I can't help but feel I will be in the market for a new tenant soon....

[Property Man]

I see that I have failed on the reference check steps and need to start researching that next as I can't help but feel I will be in the market for a new tenant soon....

Hi Talltimber,

How have you been going with your tenant? If you do need some credit checking advice, feel free to get in touch with our company. We belong to Tinz. Private message me and I can assist you further.

Regards
Aaron