Rent arrears: Who should pick up the bill?

Everyone understands that someone has to cover the costs when a tenant is taken to court over rent arrears.

Wednesday, October 24th 2012, 12:00AM 4 Comments

by The Landlord

Our justice system isn't cheap.

You’d hope it wasn’t the landlord picking up the bill but equally, it’s probably not the job of the taxpayers of New Zealand, either.

The cost of recovering debt should fall exclusively to the debtor.

The Government has announced a review of civil fees. Submissions are being sought but if the proposal is adopted, it will become much more expensive to take court action on debts. Some landlords may not even bother.

It will now cost $180 to get an order for examination, to determine what a tenant can pay, and $50 every time a bailiff is given a different address to attempt to serve court papers.

Debt collection firm CIA is outraged. Geoff Knight says Kiwis pay through their taxes for their justice system and it should be there for them when they need it.

That’s a fair point, but you can understand why the Government is doing this. The percentage of costs recovered by the Ministry of Justice is low by international standards – barely a quarter of what it costs to run the court system is recouped.

Maybe we should look at other ways of improving the system for landlords.

The provision to pass on court and debt collection costs should be a standard clause in the tenancy agreement that most investors use. Interest should be payable on late rent payments.

Perhaps technology could also cut costs, as it has in most other sectors. At the moment all documents have to be hand-delivered to the courts to be stamped. Isn’t it about time we were able to do this electronically?

Cases could also be held via video link to save time and money.

Recovering rent you are owed from former tenants is a horrible business. It’s a shame that the Government has decided it needs to become a more expensive one but it’s a reminder to landlords to do what they can to protect themselves before trouble arises.

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Comments from our readers

On 24 October 2012 at 11:00 am Miles said:

Perhaps after an initial scrutiny by court staff to confirm a prima facie case, a court ruling be issued that before a debtor can defend, court costs must be paid into court by the debtor.

On 25 October 2012 at 11:54 am Estata Property Mgmt said:

If recovering debt is to be made harder, tools for landlords/property managers to remove bad tenants for arrears needs to be streamlined.

On 31 October 2012 at 12:59 pm Judy said:

The Court system for Tenancies etc leaves a lot to be desired. To advocate increasing costs is ludicrous. I have lodged O/E's, Warrants to arrest etc in the past to no avail. The Bailiff goes to the property told the tenant isn't there and does nothing further about it. The RTA certainly needs more amending. It is so ridiculous that a landlord must obtain through the courts possession of his/her own property if a tenant has absconded - further why should they have to pay to do this knowing that the chance of them having any monies repaid is beyond belief. I am an Independent Property Manager having had 8 years experience and believe that the RTA is geared more in favour of tenants than landlords. If the Government intend going ahead with these changes then it should be up to the Courts to follow up any orders made at Tribunal and collect the monies accordingly.

On 6 November 2012 at 11:09 pm Chris said:

I certainly agree with the statements from Judy. Having been stung by tenant's rent arrears, abandonment's and damage of my properties in the past and to then be stung with paying for the process of lawfully gaining back my rightful possession ( - my property) / damages/ rent arrears from the bad, unlawful tenant who is breaking the law (to not pay rent, abandon & damage is against the law) in the first place is ridiculous. Applying for a Tribunal Hearing is easy. The tenant doesn't turn up of course in most cases. You can't find them to enforce the decision and there is no help from the courts who once you have been through the hearing process say it's a civil case not a criminal case therefore your problem. Why aren't the courts backing up their decisions, putting things in place for those landlords whose hands are tied to go through their processes in the first place (with delays of weeks/months). Even the Police do not want to intervene or assist when they hear it involves a rental, saying it is a civil case and needs to go to the tribunal - even where wilful damage and theft is involved. These tenants break the law and are criminals and should be treated as such!! Where is the justice when we landlords need it to protect us? The Government, Tenancy Services, the Justice System and the Police need to adjust their thinking, laws and processes to help create a more efficient, effective and powerful system where landlords are treated fairly and with dignity they afford their tenants. Landlords are the ones investing their lives - energy, money, risk and headaches into tenanting those that can’t afford or choose not to own housing, therefore assisting and easing the government of it’s social housing responsibility of those in need.

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Rent arrears: Who should pick up the bill?

Everyone understands that someone has to cover the costs when a tenant is taken to court over rent arrears.

Wednesday, October 24th 2012, 12:00AM 4 Comments

Comments from our readers