Disclaimer:
This article provides general information only and does not constitute financial, legal, tax, or investment advice. Property investment involves risk. Always do your own research and seek personalised advice from qualified professionals before making investment decisions.
Key Takeaways
- Act quickly when rent is late; early communication often resolves issues before they escalate.
- You can issue a 14-day notice to remedy when rent is 5 or more working days overdue.
- When rent is 21+ working days behind, you can issue a 14-day termination notice under Section 55 RTA.
- Keep detailed records of all arrears, payments, and communications with your tenant.
- The Tenancy Tribunal can order rent arrears to be paid and, in serious cases, terminate the tenancy.
- Prevention is better than cure; thorough tenant screening reduces arrears risk significantly.
Rent arrears can quickly become a serious problem for landlords. Even a short period of unpaid rent affects your cash flow, and if the situation drags on, you could face significant financial losses. Knowing how to respond promptly and appropriately is essential.
Why Tenants Fall Behind
Understanding why tenants miss payments helps you respond appropriately. Common reasons include job loss, unexpected expenses, illness, relationship breakdown, or simple forgetfulness. Sometimes there are ongoing financial difficulties; other times it is a one-off event.
How you respond may depend on the tenant's history. A reliable tenant who misses one payment after two years is very different from a tenant who is consistently late within the first few months.
Immediate Steps When Rent Is Late
Do not wait and hope the tenant will sort it out. The longer you wait, the harder it becomes to recover arrears. Contact your tenant as soon as rent is overdue.
First Steps (Days 1 to 3):
- Day 1: Send a polite reminder via text or email
- Day 2 to 3: Follow up with a phone call if no response
- Document: Record every communication attempt and response
- Listen: Understand their situation before deciding on next steps
Many arrears situations are resolved at this stage. The tenant may have forgotten, had a bank issue, or experienced a temporary cash flow problem they can quickly fix.
The 14-Day Notice to Remedy
If rent remains unpaid for 5 or more working days, you can issue a 14-day notice to remedy. This is a formal notice requiring the tenant to pay the outstanding rent within 14 days.
14-Day Notice Requirements:
- ☐ Must be in writing using the correct form
- ☐ State the exact amount of rent owed
- ☐ Specify the period the arrears relate to
- ☐ Give at least 14 days for the tenant to remedy
- ☐ Serve it correctly (in person, by post, or as agreed in the tenancy)
You can download the correct form from Tenancy Services. Using the wrong form or incorrect information can invalidate the notice, so take care to complete it accurately.
Termination Notice for Serious Arrears (21+ Days)
If rent falls 21 or more working days behind, you have an additional option under Section 55 of the Residential Tenancies Act: a 14-day termination notice. This is different from the remedy notice described above.
Two Different Notices:
- 14-day notice to remedy: Requires rent to be 5+ working days overdue. Gives the tenant a chance to pay and stay.
- 14-day termination notice (Section 55): Requires rent to be 21+ working days overdue. Ends the tenancy regardless of whether the tenant pays.
The key difference is that a Section 55 termination notice ends the tenancy even if the tenant pays the arrears during the notice period. This option exists because seriously overdue rent (21+ days) is treated as a fundamental breach of the tenancy agreement.
You can choose which route to take depending on your circumstances. If you want to give the tenant a chance to catch up and continue the tenancy, use the remedy notice. If arrears are severe and you want to end the tenancy regardless, the Section 55 termination notice may be more appropriate once rent is 21+ days behind.
Negotiating a Payment Plan
Sometimes tenants cannot pay the full arrears immediately but can catch up over time. A payment plan can work if the tenant is genuinely committed to clearing the debt.
Payment Plan Tips:
- Put the agreement in writing with specific amounts and dates
- Require current rent to be paid in full, plus an additional amount for arrears
- Set realistic payments the tenant can actually afford
- Include a clause stating what happens if payments are missed
- Consider whether they can realistically afford the property going forward
Be cautious with payment plans for tenants who are consistently in arrears. If they cannot afford the rent, a payment plan only delays the inevitable and increases your losses.
When to Apply to the Tenancy Tribunal
If the tenant does not pay within the 14-day notice period, or if they fail to stick to an agreed payment plan, you can apply to the Tenancy Tribunal.
The Tribunal can order the tenant to pay the arrears and may award compensation for your costs. In cases of serious or repeated arrears, the Tribunal can also terminate the tenancy.
Tribunal Application Checklist:
- Complete rental payment records showing all payments and arrears
- Copies of the tenancy agreement
- The 14-day notice to remedy (with proof of service)
- Records of all communication with the tenant
- Any payment plan agreements that were breached
Recovering Arrears After the Tenancy Ends
If a tenant leaves owing rent, you can claim the arrears from their bond. If the arrears exceed the bond amount, you can apply to the Tribunal for an order against the tenant.
However, collecting money from former tenants can be difficult. Even with a Tribunal order, you may struggle to recover the funds if the tenant has no assets or income. This is why prevention and early action are so important.
Preventing Rent Arrears
The best approach to arrears is prevention. Thorough tenant screening, clear expectations, and proactive communication all reduce the risk.
Prevention Strategies:
- ☐ Conduct thorough reference checks with previous landlords
- ☐ Verify income and employment before accepting tenants
- ☐ Set clear payment terms in the tenancy agreement
- ☐ Offer automatic payment options to reduce forgotten payments
- ☐ Maintain good communication so tenants feel comfortable raising issues early
The Bottom Line
Rent arrears require prompt, consistent action. Communicate early, document everything, and follow the legal process if informal resolution fails. While the Tribunal provides a path to recover arrears and end problem tenancies, prevention through careful tenant selection remains your best protection.
Remember that many arrears situations involve tenants facing genuine hardship. A firm but fair approach often leads to better outcomes than aggressive tactics, both for recovering arrears and for maintaining a professional reputation as a landlord.