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Default on rental debt leaving landlords out of pocket

Some landlords are being left out of pocket due to an increase in the number of applications for no-asset procedures (NAPs) through the Insolvency and Trustee Service.

Tuesday, December 9th 2008, 5:00AM

by The Landlord

The NAP service was set up a year ago to deal with simple consumer bankruptcies for people at less risk than, say, property developers who owned land and other assets with debts in the hundreds of thousands.

David Young, National President of the NZ Credit and Finance Institute explains the service deals with simple bankruptcies with bills of around $12,000 to $15,000.

He says it’s typically being used by tenants who owe rent plus money for bills.

The numbers of those applying for NAPs have climbed 500%, from 58 when the service started, to 331 in October this year.


Debt collector Barrie Wilkins of Accredited Collections says NAPs are increasingly being used as a way to let tenants who owe rent off the hook.

He says when a landlord gets a Tenancy Tribunal judgment and the tenant goes to court saying they can’t afford to pay their bills, the courts often send the tenant off to get a budgeter’s report, which can let them write off their debts through an NAP.

“So the landlord loses out and they can’t do a thing about it.”

Young says the rationale behind NAPs is understandable. “The focus of New Zealand’s insolvency law is rehabilitative rather than punitive. The act does not set out to punish people for running up debts, rather to provide them with a method to restart their lives. The debate on whether it is acceptable is however, a completely different matter.”

He just had a case where a woman owed six weeks rent on a $1,200 per week property. “The landlord is very agitated – because it was a no-asset procedure, she just walks away.”

NAPs also make credit checks difficult, as “the ruling is only for one year and when the time is up, it won’t appear on the insolvency website,” Young says.

« Will Ha have the last laugh?Time to go down under »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 3.85
ANZ Special - 2.65 2.75 3.35
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 2.79 2.79 3.39
The Co-operative Bank - Standard 4.40 3.29 3.29 3.89
TSB Bank 5.34 3.59 3.49 3.79
TSB Special 4.54 ▼2.65 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.65 2.69 2.79
Median 4.55 3.22 3.22 3.44

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