Rent arrears: what to do when a tenant falls behind

Rent arrears are the most common reason landlords end up at the Tenancy Tribunal. With the cost of living still biting, more tenants are finding themselves stretched, and a missed payment can quickly turn into a serious debt if it isn't dealt with promptly. The key is to act early, stay calm and follow the correct process.

Step 1: Make contact straight away

As soon as a payment is missed, get in touch with your tenant. It might be a simple mistake, such as a changed bank account or a payday that moved. A friendly message on day one is much more effective than a stern letter three weeks later.

If the tenant is going through a tough time, ask what they can realistically pay and when. Agreeing a short-term plan to catch up can save you both a lot of grief, but always put the arrangement in writing.

Step 2: Keep accurate records

Keep a rent ledger showing every payment due and received, along with copies of all messages and notices. If the matter goes to the Tribunal, these records are your evidence. The Tribunal will want to see exactly how much is owed and how you calculated it.

Step 3: Give a 14-day notice to remedy

If the rent isn't paid, you can give your tenant a 14-day notice to remedy. This is a formal written notice telling the tenant how much is owed and that they have 14 days to pay it. Tenancy Services has a free template you can use. Make sure you allow extra time for delivery depending on how the notice is sent.

Step 4: Apply to the Tenancy Tribunal if needed

If the arrears aren't paid, you can apply to the Tenancy Tribunal. There are a few ways the Tribunal can help:

• Payment order. The Tribunal can order the tenant to pay the arrears, sometimes by instalments.
• 21 days in arrears. If the rent is 21 days or more in arrears, you can apply to end the tenancy. If the arrears are still at least 21 days when the case is heard, the Tribunal must end the tenancy.
• Repeated late payments. If rent has been at least 5 working days late on three separate occasions within a 90-day period, and you gave the tenant written notice each time, you can apply to end the tenancy.
• Mediation. Many cases are resolved through mediation, where a mediator helps you and the tenant agree on a plan. The agreement can be made into a binding order.

What not to do

However frustrating the situation, never try to take matters into your own hands. It's unlawful to:

• Change the locks or remove the tenant's belongings
• Cut off power, water or other services
• Enter the property without proper notice or the tenant's consent
• Keep the tenant's possessions as security for the debt

Doing any of these can result in the Tribunal ordering you to pay the tenant damages, which can easily exceed the rent you were owed.

Prevention is better than cure

The best way to avoid rent arrears is to choose your tenant carefully in the first place:

• Check income and affordability. As a guide, rent should be no more than about a third of household income.
• Speak to previous landlords and ask specifically whether rent was paid on time.
• Run a credit check and search Tenancy Tribunal decisions.
• Set rent up as an automatic payment timed to match the tenant's payday.
• Take the full bond of up to four weeks' rent, which gives you a buffer if things go wrong.

Start on the right foot

Every Tenant Finder placement includes thorough credit, background and reference checks, and we collect the bond and first week's rent before your tenant moves in. It's the best start you can give your tenancy.

This article is general information only and isn't legal advice. For help with a specific situation, contact Tenancy Services on 0800 836 262 or visit tenancy.govt.nz.