Property Managers and the Tenancy Tribunal

15th October 2013 | By: Investor

Property managers and the tenancy tribunal

The tenancy tribunal should be your last resort, not your first!

The Tenancy Tribunal is supposed to be the last resort for a Property Manager not the first port of call when there is a problem.  However, some managers appear to consider the Tribunal and the Courts as their main resource to sort out problems and even spend inordinate amounts of time training their staff in these processes.  Surely this time would be better spent training staff to sort out their problems themselves?  With good training it is quite possible that disputes can be solved long before a Tribunal or Court hearing is necessary.

A Property Manager’s job is just that – to manage – not to offload problems to the legal system, that should be kept as a last resort and used only when all avenues have been attempted.

Attendance at a Tribunal or Court hearing is an extremely time consuming exercise and will most likely not give you the total outcome you are seeking.  Time is money but in the long run sorting out your own problems with your tenant,  if possible, will yield a more cost effective result – and you will have control over the outcome unlike at a hearing.

Obviously the Tenancy Tribunal is an essential tool for both the Property Manager and the tenant but should be used as a final resort only.  Constant use of this tool is both inefficient and costly.  The system can become long and drawn out and the final result in some cases will basically be a waste of time especially for the Manager as even if the case goes in their favour the tenant will be allowed to pay off arrears/damage over a period of time.

With rent arrears of over 21 days the tenant will probably still be residing at the property at the time the case is put into the hands of the Tribunal.  By the time the case comes up it is more than likely that the arrears would be nearer six weeks.  Even if the case goes in the Property Manager’s favour the tenant would be able to pay off the outstanding amount although with a termination order also made at least you could re-rent the property.  However, there is no guarantee the tenant will keep to the payment agreement in which case the District Court has to be asked to enforce the order.

At this stage an attachment order may be made for a regular sum, say $20 a week, to be taken out of the tenant’s wages or benefit until the arrears are paid.  The problem with this solution however is that the ex-tenant may change their job or benefit causing what is called a ‘falling off’ of the attachment order.  The Property Manager will then have to reapply for a new attachment order from the court to the new employer.  If the benefit type has been altered WINZ will have to be contacted to transfer the order to the new benefit type, or if this cannot be done a new court order will need to be issued.

You may have gone through all the motions but a good financial outcome for the property owner is still not guaranteed.  After all the expenses of legal action are taken into account, plus the fact that the tenant may still default on the payments (not forgetting that the process can linger on for months if not years), is this really the way to go on a regular basis?

Recovery of debts through the Tenancy Tribunal or District Court should only be used as a last resort when all else has been fruitless, if this is becoming a regular regime to recover money from tenants then the Property Manager’s system needs examination.  Arrears or payment for damage should be dealt with promptly before it escalates as shown in the example above.

Tenancy applications may be the source of the problem where the wrong tenant is accepted – possibly caused because the manager has asked for, and received, a letting fee from the tenant who is accepted.  Tribunal hearings show that acceptance of the wrong tenant in the first place is a major factor.

Secondly, if a Property Manager’s method of dealing with default payments is to e-mail, phone or text the tenant and give them 14 days notice said tenant will treat this warning the same as any other regular payments they go into arrears with i.e. hire purchase or utilities.  The scale of payment default is also going to be much higher on their rental property than say a car payment which is why immediate personal contact is essential as a weekly payment of around $300 per week escalates to a large amount very quickly as opposed to say an $80 per week car payment.  Letting fees paid by the tenant can also cause split loyalties for the Property Manager – if the District Court bailiff accepted payment from the debtors he was pursuing this would clearly be a conflict of interest, the same applies in the case of letting fees paid to the Manager.

A good Property Manager will act promptly, in person, to chase up any late payments from the tenant – that is their job after all for which they are being paid by the property owner.  Spending time and money at Tribunals and Court Hearings is not a productive process and as shown above the outcome may not cover the costs involved, prevention is better than cure.  Time wasted at hearings would be better spent fine tuning the basics of property management such as the following procedures.

Trying to ensure the property is rented for all 365 days of the year

  • Examine all applications thoroughly and check references.  Ensure your marketing attracts the best possible tenant for the property.
  • Market trends alter over time – make sure you are up to date with these and are charging market rent for the property.
  • Property inspections are a must and should be done in depth with detailed notes and photos of relevant damage or deterioration.
  • If there are problems noted ensure that any small jobs are carried out before they become big headaches.  Employ contractors you know will do a good job, remember the actual property is worth a lot of money and should be maintained to the standard required.
  • The better the tenant you can rent to the more likely it is that they will keep the property in good condition thus providing the property owner with a better overall income from the property.
  • Be the best Property Manager you can be for both the owner and the tenant.  They will have different outlooks on the property but the Property Manager should treat both with respect.

Concentrate on doing the basics well and hopefully Tenancy Tribunal Hearings will be the exception rather than the rule, and the frustrating hours spent in Hearings can be put to a much better use to grow your rental portfolio.

barry bridgman is an auckland property manager

Barry Bridgman has been managing his own investment property portfolio for 25 years. During this time, there has never been any occurrence of rent defaults or property damage and Barry’s goal is to achieve the same for your property. Bridgman Property Management is based in Auckland Central, where Barry has lived for more than 18 years.