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Why the Tenancy Tribunal isn’t your default Property Manager

1st October 2013
Leaving your property management in the hands of Court officials is an ineffective way to achieve your investment goals! Discover the profitable alternatives to relying on Tenancy Tribunal hearings.

Leaving your property management in the hands of Court officials is an ineffective way to achieve your investment goals! Discover the profitable alternatives to relying on Tenancy Tribunal hearings.

It’s a fact: no other industry in New Zealand spends so much time training their staff on how to deal with Tenancy Tribunal hearings and the District Court than the residential property management industry.

The Tenancy Tribunal is commonly seen as a viable fall-back option by many professional property managers. They seem to take the view that ‘All roads lead to the Tenancy Tribunal’. Consequently, they spend a huge amount of time in Tenancy Tribunal hearing rooms, and very little time on being trained how to avoid the need for Tribunal hearings. It would be far better if property managers were provided with more training on how to handle and resolve disputes.

It is not the Tenancy Tribunal’s responsibility to provide the management function for the Property Manager; The Tenancy Tribunal is only there to act when everything else has failed.

It is far more efficient for a property owner or property manager to invest time at the outset of a tenancy problem rather than let the problem deteriorate to the point where a Tenancy Tribunal hearing is required. Attending the Tribunal is a far more expensive option in time and financial resources – and it’s unlikely to provide you with the result you want. While you are managing the tenant problem you are in control; but when relying on a tribunal decision you are not in control. Your decision-making powers are taken away from you at the Tenancy Tribunal.

Why regular Tenancy Tribunal hearings don’t make for efficient property management

Here’s an example to show why re-occurring Tenancy Tribunal hearings do not go hand in hand with efficient property management.

Imagine a situation where a tenant is late with their rent, and after 21 days of arrears the property manager applies to the Tenancy Tribunal for a monetary and termination order. The tenant attends the Tribunal hearing, however at the time of the hearing the rent is now six weeks in arrears. A typical outcome might be that a monetary and termination order is issued by the Tenancy Tribunal. Then when your tenant doesn’t repay the debt (i.e. doesn’t comply with the tribunal order), you have to apply to the District Court for enforcement. A result of this may be that an order is made for debt repayment; this order could take the form of an attachment order on benefit, wages or salary. The debt repayment plan might be $20 per week until the rent arrears are repaid.

Typically, problems can arise with attachment orders where the tenant changes their employer or benefit type. This is referred to as the attachment order ‘falling off’. In the case of a new employer, you would need to reapply to the court for a new attachment order. For a change in benefit type you would need to contact WINZ; you may be able to get them to reattach the order to the new benefit. Otherwise, you would need to reapply for a new court order.

This kind of repayment plan is like shutting the proverbial stable doors after the horse has bolted. How will the landlord ensure that the ex-tenant doesn’t default on the repayment plan? There is a very real chance that the property owner will not receive the full payment of the debt, despite the District Court enforcement order. The time and money you and your property manager invest into this process can be excessive and protracted over a number of years.

The previous example is just one of many that can occur when attempting to recover a debt through the Tenancy Tribunal and District Court. Don’t let small debts escalate to the point where they become large recovery problems!

Regular Tenancy Tribunal hearings are symptoms of a bigger problem

The primary source of such problems with Tenancy Tribunal hearings is the original tenancy application, where the wrong tenant applicant was offered the tenancy. The tenancy application process is also contaminated while the property manager is being paid a letting fee by the tenant.

The secondary problem here is where the property manager views adequate tenant communication as an email, text or phone call and 14 days’ notice. This is nothing more than the communication received by the tenant when they miss a payment for their utilities provider or hire purchase company.

Consider too, the value of the asset that the tenant is defaulting on. A $2,000 rent default on a property that’s worth $500,000 is far more serious than missing $80 on a television hire-purchase payment.

Again, a property manager might not be so proactive at managing the above problem while they have received remuneration (i.e. letting fee) from the tenant. As an example, the District Court bailiff would not be acting for his employer if he was also receiving remuneration from the debtor he was pursuing.

That’s why it’s so crucial that a property manager does all they can to avoid late rent payments, rent defaults, and the need for Tenancy Tribunal hearings. It is a matter of protecting the property owner’s investment. And taking a proactive approach to property management by ensuring this doesn’t happen in the first place is a far better use of the property manager’s time than shuffling around Tenancy Tribunal hearing rooms.

How a property manager should be spending their time

If a landlord spends minimal (or zero) time in Tenancy Tribunals, there are some very productive ways in which they can be spending their time. This includes:

  • Carrying out detailed property inspections so you can identify small issues before they become big headaches.
  • Ensuring that properties are let for 365 days per year.
  • Keeping track of market trends to ensure that you’re always charging market rents.
  • Fine-tuning your tenant application and marketing processes to attract more A-grade tenants.
  • Managing contractors so that they are adding value to the property.
  • Improving the service you provide to your tenants and property owners.
  • Enhancing the owner’s asset so that it is worth more; attracts a better quality of tenant; and secures a greater income stream.

If you do these things, and do them well, you’ll be growing your rental income in multiple ways. (And you certainly won’t be doing that by attending Tenancy Tribunal hearings.)

Summary:

At Bridgman Property Management, we prefer to manage any disputes and gain a result in our clients’ favour. The result of this is minimised tribunal time and increased time for focusing on growing our clients’ rental income.

 

 


 

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