Landlords $1.3 million out of pocket in unpaid rent for first two months of this year

Landlords around the country are chasing close to $1.3 million in unpaid rent for residential tenancies that ended or were on the brink of ending in the first two months of this year.

One Auckland tenant owed a whopping $33,000 for falling behind in rent over just 21 days while a few others owed close to $20,000.

Another lay dead in their council flat and was discovered only when an agent for the landlord called in to find out why the rent payments had stopped.

Despite efforts by the landlord to find next of kin, they “did not engage with the process”, the Tenancy Tribunal said in its decision last December to terminate the tenancy.

Landlord Frank Saxton, who has rented out properties for 40 years and has written a book on the topic, says as tragic as the situation sounds, it’s not the first time that’s happened.

He is not especially surprised at the sums outstanding when taken as a percentage against how much rent was likely paid then.

“Rent arrears is the bread and butter of the work done by the tribunal,” he says.

Frank Saxton has been a landlord for 40 years and has even written a book on the topic. Photo / Tracy Neal

Of the 684 decisions it released in January and February this year, 431 included orders for rent arrears. The number is roughly half what it was at the same time last year.

New Zealand Property Investors Federation (NZPIF) vice-president Peter Lewis says the figure sounds “on the right track” in terms of what he’s hearing.

Property investor and landlord Gaire Thompson says the tenants in his 10 residential properties are hardly ever behind in rent - it is the tenants in his commercial properties now lagging.

Renters’ advocacy and campaign group, Renters United, declined to comment while budgeting advisers say the problem isn’t a lack of budgeting skills, as one landlord suggested, it’s a lack of money.

“It comes down to what can give easier,” said one budgeting services adviser.

‘Getting money out of tenants is virtually impossible’

The total is a tally of rent arrears orders in Tenancy Tribunal decisions released in the first two months of this year, for tenancies that ended or were renegotiated over that time. There were many more decisions released in that timeframe that related to other times throughout last year and weren’t counted in the total.

The majority of orders were for rent owed between $2000-$3000, with some up to $10,000 in arrears. A few more hovered close to $20,000 and three orders were for a little over $30,000.

In one case, the tenant in a Wellington apartment block owed $31,463 rent arrears to January 11 this year.

The landlord’s evidence was that rent had not been paid since September 2020.

“The rental arrears are exorbitant. The landlord is not, however, seeking termination, as it is entitled to; it is only seeking an order that the rent arrears be paid,” the tribunal said.

The NZPIF’s Lewis says the figures reflect only those landlords who choose to chase up unpaid rent.

“The first thing I hear is that a lot of people just don’t bother. Getting money out of tenants is virtually impossible,” he claims.

“A landlord will get an order but all that means is that the tenant can’t deny they owe money but it goes nowhere.”

Then there is the time it takes to get a case before the tribunal.

“It can take up to three months to get a hearing and meanwhile the tenant is sitting there not paying rent,” Lewis says.

He says changes to the Residential Tenancies Act that modified a clause over rent arrears haven’t helped, despite it being aimed at assisting landlords.

Since February 2021, landlords have had an additional tool in the eviction kit if a tenant is at least five working days behind in payment, on three separate occasions within any 90 days.

“It’s an attempt to be more forgiving to errant tenants but it’s made the delays much worse,” Lewis says.

Saxton, who has seven tenants in two separate properties on Nelson’s city fringe, is an “old-school” landlord.

He still changes the lightbulbs in his rental properties for tenants he says prefer direct contact over going through a third party.

Saxton believes bad management is behind any rental being thousands of dollars in arrears.

In January this year, the owner of a property in Auckland’s Blockhouse Bay owed $19,500 in rent filed an expedited termination application with the tribunal, which was declined on the same day.

The tribunal had concerns about how the owner managed his rental property and if he had taken advantage of students from China who “most likely do not know their legal rights under the Residential Tenancies Act”.

The landlord then applied for termination of the tenancy on the grounds of abandonment.

The five tenants moved in on a fixed agreement for a year from February 2023 and by the time of the hearing in January, two of the five had left the country.

After deducting $7400 for the bond the landlord had failed to lodge with the Bond Centre, the tenants were ordered to pay $12,120 of the $19,520 rent still owed.

Bond wrangles and black market rentals

Landlords left out of pocket have been able to claw back a percentage of outstanding rent through bonds held, but in many cases, unpaid rent was only a portion of what was owed by tenants who had vanished or had been evicted.

“A bond might be the only leverage a landlord has, but after the costs of maybe arrears for water rates and damage to the property, it leaves nothing,” Lewis says.

The maximum bond a landlord can take is four weeks’ rent.

Lewis says landlords are under no obligation to take a bond and it’s a reason bond data can skew the true picture of rentals in New Zealand.

“Black market rentals” exist when landlords don’t want to declare extra income.

“If there’s no bond lodged, there’s no record of a rental which is why I think bond data doesn’t give a complete picture,” Lewis says.

A decision by the Tenancy Tribunal with a breakdown of what was owed to the landlord, minus the bond which he had failed to lodge.

Occasionally there are traps for tenants paying a bond, as one man discovered last October.

He was allegedly duped out of $1200 in bond and rent in a Christchurch flat-share after he signed with the “landlord” and handed over the money to the person, who turned out to be the tenant, the tribunal said.

When the man asked for his money back, she told him she could not repay him.

The tribunal did not have jurisdiction to hear the matter, which was now with the police.

‘Good tenants are now struggling’

Saxton has had plenty of experience with tenants not paying rent, although as a self-described “mature landlord” without a lot of debt or pressures on him to push the rent up, the challenge is less pronounced than it once was.

He’s also “looking for a quiet life” and charges below-market rent.

Tenancy Services says market rent is the amount a landlord might reasonably expect to receive and a tenant might reasonably expect to pay.

The median weekly rent in December 2023 was $600 a week.

Saxton says that all the time he’s been a landlord, he’s written off very little in rent arrears.

“You get a tribunal order and a money order and the tenant might leave and years later the money turns up in my bank account. It seems to find its way through the system.”

Lewis believes the current economic situation has contributed to the problem of people not paying their rent.

“I would say it’s worse. I know of landlords who’ve had good tenants for years and who are now struggling.

“These are good tenants under financial stress and who paid rent on time regularly and who might now be paying two or three days later than usual.”

Long-term tenant Ingrid, who spends 40 per cent of her and her husband’s joint income on rent, says she’s never once missed a rent payment, even though at times it’s been really hard.

She works in retail and her husband drives a truck. They pay $660 a week for a rental in Tauranga, having moved nine years ago from South Auckland.

Tenant Ingrid has rented all her adult life. She now lives in Tauranga with her husband and is content to remain renting, despite its challenges.

She says it was equally tough 30 years ago when she was paying $180 a week for a two-bedroom flat in Auckland against earnings of $260 a week.

“I don’t want to pretend I’m holier than thou because I’m not but there’ve been some weeks where we’ve had no money left over - the day before payday there’d be $1.40 in the bank, but it’s never been an option to not pay the rent.”

“If you don’t pay it one week, the next week it’s double and no one can afford that.”

Ingrid has lived in no fewer than eight rentals throughout her adult life. To her, having come to New Zealand in 1986 from the Netherlands as a child, where no one she knew owned a home, renting was an accepted part of life.

“Rent was always such a big chunk of our income. Every time we saved a bit of money, something else always happened so we never got the chance to save a deposit for a house.”

She says it was tough finding a rental in Tauranga when they moved nine years ago when a position opened up in the company where her husband works.

But it’s tougher now.

“Last year, we had to move when the house went on the market and then it became really scary because we had to find somewhere else.”

Saxton says a factor contributing to the shortage is the lack of landlords.

“I feel the industry has let the public down because we haven’t built new product to put into the market to meet increased demand.”

Lewis says people are “yelping for rentals” but buying a property as a rental is no longer viable.

“Even if you had enough capital that you might buy mortgage-free, you still wouldn’t because you can get a better return by putting the money in the bank.”

Thompson, the landlord, says big hikes in rates, insurance costs, compliance, and increased maintenance costs forced people out of providing rentals.

Ingrid believes tenants often put up with a lack of maintenance or poor repairs through fear of increased rent if they complain.

The prospect of remaining a tenant as she edges towards 60 doesn’t faze her. It’s a culture she’s used to and one she’s adept at handling.

“I’ve just never had that urge to own my own house.”

But she’s proud that one of their adult children has recently bought their own home and their other adult children live busy lives in rented homes.

Tracy Neal is a Nelson-based Open Justice reporter at NZME. She was previously RNZ’s regional reporter in Nelson-Marlborough and has covered general news, including court and local government for the Nelson Mail.