Rent arrears are an increasing problem for landlords as the cost-of-living crunch and unemployment has put many renters on the financial breadline. Rent arrears cases are clogging up the Tenancy Tribunal and there are calls for a separate division to handle these.

Of the 6,093 landlord applications to the Tenancy Tribunal in the fourth quarter of last year, 62.25 per cent were rent arrears, with 46.80 per cent of all applications in Auckland.

This works out to about 6 per cent of all tenancies going into arrears and about 2 per cent of landlords every quarter taking rent arrears cases to the tribunal.

It’s not known how many landlords don’t go to the tribunal and come to an arrangement with tenants over arrears and forgo missed rent payments, or how many tenants are getting into arrears at multiple properties.

While not a huge number in terms of the number of rental properties throughout the country, it can add up to a big financial burden on landlords. It takes on average eight weeks to have an application processed by the tribunal. In Auckland it’s even longer to get a hearing.

The numbers

Last year 29,309 tribunal applications were made. This was up from 25,362 in 2023 and 20,373 in 2022 – the majority for rent arrears.

In the first two months of last year, landlords were dealing with around $1.3 million of unpaid rent arrears, based on tribunal data. Most of the arrears’ orders were for amounts between $2,000-3,000, with some reaching up to $10,000.

The loss to the industry each year is well over $100 million – and that is just for cases that go through the tribunal.

It can be difficult for landlords to collect large sums of money due to the ineffectiveness of civil enforcement in New Zealand.

If the arrears sum is moderate many landlords don’t bother to enforce their rights through the tribunal because the potential payoff is peanuts in comparison with the cost and time involved in participating in the tribunal process.

It takes just over eight weeks to hear a residential property case nationally, except in Auckland, where it is longer. The eight weeks was the average time from when an application was submitted to its first tribunal hearing date.

Tribunal dispute resolution national manger Katie Gordon told the NZ Herald recently the Ministry of Business, Innovation and Employment, the Ministry of Justice and the tribunal were continuously working to make operations as efficient as possible without compromising the quality of the service provided to participants.

Examples of recent changes included greater use of remote hearings and improvements to scheduling to cut the time it takes for people to find out when their mediation or hearing is. Tribunal wait times improved as a result of these and other factors.

Sounding the alarm

Despite this, the New Zealand Property Investors Federation (NZPIF) is sounding the alarm and pushing for a separate division of the tribunal to handle simple arrears cases only.

It put this to all political parties before the last election and since then the issue has been pushed from the Justice Minister to Courts Minister and now Housing Minister.

“We are confused and having a bit of trouble identifying who should make these changes,” Matt Ball, NZPIF PR and advocacy manager says.

“We obviously talk to Housing Minister Chris Bishop, and he is receptive to open discussion, so we will raise it with him directly, but it would be nice to involve all the agencies.”

Ball says it is an issue both tenants and landlords have an interest in because the tribunal is being clogged up with what essentially are minor cases and more serious cases are taking much longer than necessary to be heard.

“Many rent arrears cases do not require the nuanced adjudication that other tenancy disputes might.”

Ball says NZPIF’s argument is that it’s a very straightforward matter – either a tenant has or hasn’t paid the rent. There is little room for dispute, and it is not a complex legal disagreement.

“If you haven’t paid rent for three weeks, then that can have a severe consequence for the landlord who must keep paying the mortgage and other outgoings on the property. The process of recouping the arrears can take a significant amount of time that can add to the money lost.”

Under current regulations, landlords cannot bring a case for tenancy termination until rent is at least 21 days in arrears.

System too slow

The existing system can be too slow for landlords dealing with accumulating unpaid rent, often leaving them with significant financial burdens while waiting for a resolution.

David Faulkner, Property Brokers property management general manager, says there are many stories of landlords struggling to evict tenants, which impacts their ability to re-let the property and causes cashflow issues,

NZPIF vice-president Peter Lewis says this means, on average, a tenant could live rent-free for up to 55 days – or nearly two months – before a resolution is reached.

“For landlords, even with a maximum bond claim, unpaid rent then exceeds the bond amount, leaving them struggling to pay their own unavoidable costs.”

He say mediation, intended as an initial step for dispute resolution, often fails when tenants refuse to participate. In such cases, the matter proceeds to the tribunal, adding at least two weeks to the process – sometimes longer.

Part of the problem was when the former Labour Government changed section 56 of the Residential Tenancies Act (RTA) to state adjudicators may issue termination orders if a 14-day notice to remedy rent arrears is not complied with.

Lewis says previously, section 55 allowed for mandatory termination orders when arrears exceeded 21 days.

“However, amendments to the RTA in 2021 introduced conditional orders, creating a less definitive process that often requires hearings, further burdening the system.”

Another problem is when tenants come to an arrangement to pay their rent arrears and stop paying. Landlords then have to go through the whole tribunal process again. It really drags out the whole system. “We want to see a return to more unequivocal language.”

“The inefficiencies in the tribunal system have persisted for years, causing frustration for all parties involved,” Lewis says.

Property Brokers, which has a zero tolerance policy to rent arrears, lets tenants know if the rent falls behind by a week, it will apply to the tribunal to resolve the matter.

While they are waiting to get a tribunal hearing, the arrears continue accumulating, Faulkner says.

“This helps nobody. The landlord is out of pocket, and the tenant could find themselves evicted with a bad credit rating.”

He says when the tribunal handles rent arrears cases, it wastes time for the landlord and adjudicator.

“Typically, tenants do not attend these hearings, making the process one of merely putting a formal seal on an order.”

A more efficient solution would be to handle rent arrears cases remotely outside the tribunal, he says.

“After the tenant is 21 days in arrears, the landlord could submit an application with all necessary evidence, such as rent statements, arrears notices, a copy of the tenancy agreement, and the tenant’s contact address for service. Under section 55 of the RTA, if the tribunal is satisfied the tenant is at least 21 days in arrears, it must make an order terminating the tenancy.”

Faulkner says a remote adjudicator could verify the submitted information and issue orders for termination and possession without a formal hearing.

Tenants will still retain the right to contest the decision within five working days if they can demonstrate a substantial wrong or miscarriage of justice, as stipulated under section 105 of the Act.

“This process will limit the risk to the landlord to approximately five weeks of rent arrears,” he says.

“Dealing with rent arrears cases remotely will reduce the tribunal’s workload by about 120 cases a week; adjudicators will be able to provide faster resolutions for complex cases with a lighter caseload; there will be consistency and transparency by using standardised procedures for rent arrears cases; and economic efficiency by avoiding unnecessary hearings for both landlords and tenants.”

Potential gains

Faulkner says implementing this reform requires careful planning but the potential gains in efficiency and justice make it worthwhile.

Tenancy Services already offers a fast-track resolution option for resolving rent arrears cases quicker, allowing for expedited hearings and faster outcomes.

Under the system, the landlord and tenant have to reach an agreement to repay the debt. This agreement must consist of the actual debt amount up to the day before the next payment is due; details of how the debt will be repaid; the date the payments will begin; and the consequences agreed to if any payments are missed.

The landlord must tell the tenant they will be filing a tribunal application for fast-track resolution; get a current phone number from the tenant, and check the tenant is available to take a mediator’s phone call to confirm the resolution agreement.

Ball says he has never heard of a landlord using the resolution. “It really is like asking turkeys to vote for Christmas. A landlord has probably got more chance of getting a tenant to pay any arrears by talking to them directly than having them agree to a mediator’s phone call.”

He says if a landlord is having to go through this process, then clearly the tenant is not paying back the rent arrears. “The landlord would be better just asking the tenant how they can pay the arrears.”

Proposed tribunal reforms

The New Zealand Property Investors Federation has laid out reforms it would like to see to the Tenancy Tribunal system for rent arrears cases.

• Create a separate division for rent arrears cases Landlords would submit applications with supporting evidence of arrears, which would be reviewed on the papers rather than requiring a courtroom hearing. This process could operate online, allowing adjudicators to work remotely, reducing costs, and accelerating decisions.
• Implement a fast-track system for urgent cases Urgent applications, such as cases involving tenants who have stopped paying rent but refuse to vacate, should be prioritised. A fast-track system would ensure these cases are heard within five days of submission, minimising financial losses for landlords and resolving urgent disputes promptly. The fast-track initiative would be feasible if routine rent arrears cases were handled administratively, freeing up court time.
• Strengthen enforcement mechanisms Successful claims by landlords often result in hollow victories due to weak enforcement. To address this, the NZPIF recommends granting landlords access to tenant information held by government agencies, enabling better tracking and accountability for unpaid rent or damages.
• Introduce penalties for unlawful tenant actions It is common for tenants to stop paying rent after giving notice to end a tenancy, leaving bonds insufficient to cover arrears, damages, or other costs. Making this practice an unlawful act would deter such behaviour. Additionally, exemplary damages for tenant breaches should be increased to act as a meaningful deterrent, with higher penalties for repeat offenders.