Tenants not paying rent is possibly a property owner’s worst nightmare. After all, rental properties are there to make you money and when tenants stop doing that, it can leave you stuck in the mud. We outline some important best practices when it comes to dealing with tenants who are slow to pay their rent. 

A solid tenancy agreement is paramount

As a landlord first and foremost, it is your responsibility to go through the tenancy agreement with them, make sure both parties sign it and that everyone has a copy to refer to. As well as this you must make sure you cover all of your general responsibilities as a landlord throughout the tenancy. Of course, this takes up precious time but it also means if tenants owe you rent, they have no excuse for not paying.

With responsibilities also come rights. Overdue rent is an automatic breach of a tenancy agreement and the Residential Tenancies Act 1986. Early intervention is key to sorting any overdue rent issues. Make sure you have good records of payments and can provide details of any late rent payments, as well as payments missed. For example, bank statements and receipts. As long as these are regularly monitored, issues with rental payments shouldn’t get too out of hand.

Formal process to follow

In 2014, 74 percent of tenancy tribunal claims were for rent arrears. So while the process below may seem harsh, it is important to protect your investment. In some instances, you may have to make a judgment call. For example if you've had the same tenants for five years and never had a problem, then it could pay to show some leniency. However, a late rent payment early into the start of the tenancy should sound alarm bells and action should be taken immediately. 

First day in arrears

The offending tenants should be contacted in person or via a phone call to let them know that they have missed a payment. It may be that there was a problem with the bank transfer, so give your tenants a chance to explain. You then need to ascertain whether you can expect payment in the next 24-48hrs. If the tenant cannot commit to making the payment in this time frame, or agrees and misses it, then your next step is to issue what is known as a  '14 Day Notice to Remedy'.

Download: Tenancy Services' 14 Day Notice to Remedy template

As previously stated, a late rent payment early into the start of the tenancy should never be tolerated. Landlords who find themselves in this situation should let the offending tenants know that late rent or overdue rent payments are unacceptable and issue a 14 Day Notice to Remedy immediately.

The day after issuing a 14 Day Notice to Remedy

The day following the issue of the 14 Day Notice to Remedy, you should send an application to the Tenancy Tribunal for termination and possession. This only costs $20.44. 

Tenancy Services will then notify both you and your wayward tenant that an application has been made and to expect a mediation meeting after the expiry of the 14 Day Notice to Remedy. This is often enough to show tenants that you mean business and prompt them to settle all arrears. If tenants pay the arrears before the expiry of the 14 Day Notice to Remedy, then the application to the Tenancy Tribunal can be cancelled. 

Mediation

If the outstanding rent has not been paid on the expiry of the 14 Day Notice to Remedy, then the next step is mediation. Make sure you bring all relevant documentation to the meeting, remembering to include the following: 

• The 14 Day Notice to Remedy and when it expires
• A copy of the signed tenancy agreement.
• Summary of rent payments

Provided you have followed the correct process and all the necessary documentation is in order, then the mediation meeting should deliver a satisfactory outcome i.e. arrears payed and the tenants moved on - all without having to go to a Hearing. 

21 days in arrears

If for some reason a landlord fails to involve Tenancy Services and the rent hits 21 days in arrears, you can make immediate application to the Tenancy Tribunal for the termination of the tenancy and a Possession Order. The Tenancy Tribunal will attempt to offer mediation support, but you are within your rights to skip the mediation and have the tenancy terminated.

Clearly, overdue rent is messy, time consuming, confrontational and generally a downright hassle. Keeping on top of rent payments takes time but is valuable in the long run. If you don’t have time to keep up with tenants and ensure everything is up to date 24/7, problems could get a lot bigger than they need to, which highlights how important professional property management is. Yes, hiring someone to do the job will cost you a little, but when you compare it to the amount you could lose in terms of rent arrears and legal bills, not to mention sleepless nights, it’s well worth the investment.

For more best practice tips to help you better manage and protect your investment, download our free guide: