Rent arrears: Who should pick up the bill?

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Everyone understands that someone has to cover the costs when a tenant is taken to court over rent arrears.

Wednesday, October 24th 2012, 12:00AM 4 Comments

by The Landlord

Our justice system isn't cheap.

You’d hope it wasn’t the landlord picking up the bill but equally, it’s probably not the job of the taxpayers of New Zealand, either.

The cost of recovering debt should fall exclusively to the debtor.

The Government has announced a review of civil fees. Submissions are being sought but if the proposal is adopted, it will become much more expensive to take court action on debts. Some landlords may not even bother.

It will now cost $180 to get an order for examination, to determine what a tenant can pay, and $50 every time a bailiff is given a different address to attempt to serve court papers.

Debt collection firm CIA is outraged. Geoff Knight says Kiwis pay through their taxes for their justice system and it should be there for them when they need it.

That’s a fair point, but you can understand why the Government is doing this. The percentage of costs recovered by the Ministry of Justice is low by international standards – barely a quarter of what it costs to run the court system is recouped.

Maybe we should look at other ways of improving the system for landlords.

The provision to pass on court and debt collection costs should be a standard clause in the tenancy agreement that most investors use.  Interest should be payable on late rent payments.

Perhaps technology could also cut costs, as it has in most other sectors. At the moment all documents have to be hand-delivered to the courts to be stamped. Isn’t it about time we were able to do this electronically?

Cases could also be held via video link to save time and money.

Recovering rent you are owed from former tenants is a horrible business. It’s a shame that the Government has decided it needs to become a more expensive one but it’s a reminder to landlords to do what they can to protect themselves before trouble arises.

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