I Rang Tenants Who Hadn’t Paid Rent (In The Field Friday)

When a tenant falls behind on rent, most landlords assume the worst. But after sitting in on rent arrears calls, the real reason was usually much simpler: money management, not no money. In this In The Field episode, Ed sits in with a property manager as she chases missed rent. You’ll learn: The most common reason tenants fall behind on rent in NZHow payment plans and mediated orders actually workWhy going nuclear on the first call is usually the wrong moveThe takeaway? A missed rent payment doesn’t make someone a bad tenant. How you handle it decides what happens next. Let us know your thoughts by leaving us a voice message on the Property Academy Hotline⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.speakpipe.com/PropertyAcademy For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Stay ahead of the NZ property market⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/private-property-sign-up?utm_source=podcast&utm_medium=promo&utm_campaign=pp_signup ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:08Speaker 00

  Hello and welcome along to the Property Academy Podcast by Opes Partners. I'm your host, Sebik Knight.

• 0:12Speaker 01

  And I'm Andrew Nichol.

• 0:13Speaker 00

  And this is the show that helps Kiwis go from zero to five investment properties. So you can be financially free and stick around for the next 15 minutes because you're going to come with me as we go into the field to see what to do when the tenant doesn't pay the rent. You're going to hear what property managers actually say to the tenant and what happens if they still don't pay. Now, of course, nobody really enjoys chasing their tenants for rent. And so I sat down with one of my property managers from Opes Property Management, Rochelle, who actually is my property manager for one of my properties. And I wanted to understand, what do you do if the tenant doesn't pay rent? Like, what should I actually say? What do tenants say back?

• 0:56Speaker 00

  And so I clipped a little microphone on her and we started calling. Now, of course, I won't play you what the tenant said, but I'll play you what Rochelle said because she said it could. And what I wanted to know is what's the process if somebody doesn't pay?

• 1:09Speaker 02

  Day one of being in rent arrears, this is more of just a friendly reminder that we're in them. It is a formal template that we use, but we just say, look, your rent didn't come in yesterday.

• 1:18Speaker 01

  And that's an email.

• 1:19Speaker 02

  A little reminder, yeah. If they're still in arrears, days two to three, we will email them again with more of a sterner email template, which says that if it's not rectified immediately, we will issue them with a 14 day notice to remedy. Then by day four and five, we issue them that breach notice, which is that those are the notices that you can use a tribunal. So days one to three is just more of a friendlier one. And then by day six and seven, we are applying to tribunal.

• 1:49Speaker 01

  Oh, happens quite quickly, doesn't it? As it should.

• 1:52Speaker 00

  Well, yeah, if you sign a contract saying you're going to pay the rent for a place and you get to live in it, well, you've got to pay the money, don't you?

• 1:58Speaker 01

  Now, with the calls, obviously these are emails, so it's all documented, but obviously the calls are going to happen as well. Where do they slot into the process?

• 2:06Speaker 00

  Well, often you would start calling straight away as well, though many of the property managers will schedule in perhaps two days a week where they specifically go through and start calling. But actually, interestingly enough, the first call we made was to a landlord whose tenant was behind on paying rent. And so this is how the call went.

• 2:28Speaker 02

  I've been tugging away with your tenant a little bit, just with her rent again. As of yesterday, she's, she did pay a bit over the weekend, but as of yesterday, she's sitting 10 days still in arrears. So I did actually put a tribunal application in just to kind of get on top of it because there were a few times where she promised to make a payment, you know, on the Fridays. And then it didn't come through in time and then she'd pay it a bit late again. So it was kind of getting to the point where I just wasn't quite trusting her commitment to what she said she was going to pay when.

• 3:02Speaker 00

  So this is pretty tough, right? Because the tenant's about 10 days in arrears, thus saying, I'm going to pay, I'm going to pay, when Rochelle's calling them up and sending emails, but not necessarily sticking to making the payment when they said that they would. Now, actually, remember this case because next Friday, it's going to come back and there's going to be a little part two to this. But it was interesting hearing the landlord's reaction, which I obviously won't play for you, but they were very understanding, like this landlord wanted to give this tenant a go. The tenant's quite young, they're in their mid twenties, this is their first rental property. They didn't necessarily have a history of renting places, but the landlord was like, I want to give these young people a go.

• 3:47Speaker 00

  But they were quite understanding, like, hey, this isn't great, but thank you for following the process, putting it through into tribunal to eventually go to a mediation. And we are going to hear that mediation next week.

• 3:59Speaker 01

  That's actually really interesting because you'd think that a lot of landlords might be quite anxious at that stage because if they've got a mortgage to pay, well, the bank doesn't care that your tenants are 10 days late and they're young and you want to give them a go, they want to be paid.

• 4:12Speaker 00

  Well, I also wanted to understand, well, why is it that tenants don't pay? Like, what's going on that means that that doesn't happen?

• 4:20Speaker 02

  These tenants, they are always behind. It is a weekly struggle, chasing them with rent.

• 4:26Speaker 01

  So they're just not good with money.

• 4:27Speaker 02

  They are just not good with money. I've tried to get them to set up an appointment with like a financial advisor through work and income to help them manage their money, but obviously you can't force people to do stuff like that, right? So we are on top of them every week. They were also at a point at some stage, the last inspection I did, their money managing is so bad that their power is not even on.

• 4:49Speaker 01

  Oh, power's not on. So of course that means your hot water's not on either.

• 4:54Speaker 00

  So they would be, you know, unfortunately robbing Peter to pay Paul, juggling money between their various bills, right? And the reason I wanted to play you that is not to talk down on the tenants, right? But just to show you, some tenants, if they're not paying, it's not necessarily that the evil vindictive people who hate landlords, they could be going through a really tough time and you don't necessarily know what that is because they might not feel comfortable bringing that up. I'm not trying to make excuses for them, right? I'm just trying to say that this is why they sometimes won't pay. Now, I do want to put this into context though, because currently of Rochelle's portfolio,

• 5:36Speaker 00

  four out of 120 properties have some sort of rent arrears. So it's about 3%, which is below the Auckland average of about 6%. But it's just to show you that it can happen, doesn't happen to everybody, but it can happen. And this is some of the reasons why it might. But the other thing that I wanted to understand was, can these tenants actually afford the rental property? Because of course, one of the things that property managers can and should do before they accept a tenant is to check their income, can you actually afford it? Because if you've got a tenant thinking that they're going to pay 50% of their income towards rent, well, that's probably not realistic, like they're more likely to get into rent arrears

• 6:20Speaker 00

  because the property legitimately isn't appropriate for them, like it's too expensive. And so Rochelle has said, I did the income checks. It looks like because this is their first property, their first rental, they don't have those money management skills at the moment. How often do you have rent arrears on your properties that you own?

• 6:39Speaker 01

  Not very often would be the answer that I would give. But then sometimes the property managers take care of so much for me that I don't really get that involved in it.

• 6:48Speaker 00

  So you might not be able to see it. I suppose the other thing is because a property manager pays you out twice a month, generally on the first and on the 16th, the tenant might be behind, but you might never know that or.

• 7:01Speaker 01

  Well, they get caught up between the next payment cycle.

• 7:03Speaker 00

  Exactly. They might catch up and so you're still getting your money, but they might've been a day or two late without you really realising. So we ended up calling some more tenants and again, I won't play you this call because what was interesting about it was that we called up and we said, hey, we're calling on behalf of Opus Property Management. You're currently eight days in rent arrears, so we need you to catch up with your rent. Now, the tenant said, sure, I'll do that. And so I was like, okay. And so the obvious question was, well, when are you going to do that? And he said, this week. Okay, this week, okay. What, what specific day are you going to pay it on, just so that we can know and understand? And then he said, can you email me because I'm driving at the moment?

• 7:47Speaker 00

  And then it all wrapped up quite quickly and I was really surprised about this call and I want to play you our reaction.

• 7:54Speaker 01

  How do you feel that went?

• 7:56Speaker 02

  Um, I think it could have been better. I feel like he was blowing me off a bit, so because he didn't ask the amount, he didn't really seem too concerned. And then when I wanted an answer from him, he was like, well, I'll just do it this week. Well, what are you going to do this week? When are you going to do it this week? And then all of a sudden he was driving, right?

• 8:15Speaker 01

  He sounded so calm, like it wasn't a big deal.

• 8:19Speaker 02

  Didn't say sorry, which is things that we all look for as well. So if that phone call went in a way that, oh, hey, look, yep, we can catch it back up. Can I make a payment plan? I can pay this much extra on top of my rent this week. We would then look at going straight to a fast track mediation order.

• 8:37Speaker 00

  So it was so surprising because if I was in rent arrears and somebody called me up about it, I'd be very apologetic, you know, and trying to find a way. But because he wasn't, I was like, I wonder whether this guy really just doesn't care.

• 8:52Speaker 01

  Yeah. And if he's giving some kind of quick answer, oh, you know, sort of that to get them off the phone, probably not going to see that money.

• 8:58Speaker 00

  Well, what you'd often typically see as well is a discussion around a payment plan because often landlords and property managers are quite understanding, hey, you might be $400 in rent arrears, but if we can catch up with $50 a week in eight weeks, it's going to be all paid, all good. We don't have an issue. We can go and get what's called a mediated order where you put that agreement through the tenancy tribunal, they write it all up and the tenant then has to stick with it. Otherwise you can put that through into debt collection. However, this works really well for tenants because then there's clarity on both sides as well. Now, I sat down with Rachelle about a week later to go through some more calls and blow me down, you would not believe what happened.

• 9:41Speaker 00

  So do you know with the guy we called last time who was driving and he was very nonchalant, did he end up paying?

• 9:47Speaker 02

  He paid.

• 9:48Speaker 00

  Oh, he paid it all?

• 9:49Speaker 02

  He paid.

• 9:50Speaker 00

  How quickly?

• 9:51Speaker 02

  I think the next day.

• 9:52Speaker 00

  Oh, you actually did?

• 9:53Speaker 02

  He did. Yeah, yeah.

• 9:54Speaker 00

  Was that a surprise to you?

• 9:55Speaker 02

  Yeah. I even said to Avon, considering how the phone call went, I was real surprised.

• 10:01Speaker 00

  You scared him?

• 10:01Speaker 02

  Yeah.

• 10:02Speaker 00

  Yeah, good. Or you encouraged him?

• 10:04Speaker 02

  I think that's the importance of going, instead of, you know, making a phone call and going, oh, your own rent arrears, you need to pay and just going, okay, when you're ready, you know, going, well, no, when? Or how much are you going to pay? Not something we're just going to go, okay, sure, no worries, you know?

• 10:18Speaker 00

  Yeah.

• 10:19Speaker 01

  That was surprising. I was sure that he was never paying that money.

• 10:23Speaker 00

  No, but he did it the next day. I suppose what that got me thinking is people will react to things in different ways as well. So perhaps I shouldn't have written him off straight away, being like, that guy's not going to pay. He doesn't care. Actually, he paid it the next day. I don't know why he was late, but I wanted to show that that actually can happen as well. One thing that was interesting is as Rachelle talked about in that last clip, it was really interesting to note the difference between her manner when we were doing rental inspections, where we were very nice to tenants because we're in their space. There's a little bit of a safety issue if you're in someone's home and they're there. And obviously at this point, they haven't done anything wrong. So of course you're going to be very nice to the tenant, even if it's a little bit untidy, right? We can be very, very, you know, nice,

• 11:07Speaker 00

  you know? And of course, we still want to be nice when we're calling up, asking for rent, but we might want to be a little bit more direct around, this is very serious. You said you would pay, you didn't pay. When are we going to do that? We need to figure out exactly when that's going to happen. Because if you say, hey, I'm going to pay it on Friday. Well, cool. I don't need to keep chasing you until Friday because you've told me what you're going to do. And so then I can kind of back off a little bit. But in this case, taking that quite proactive approach really helped. So we called up another tenant and this time they seemed genuinely surprised. So we called up and said, hey, look, we're giving you a call on behalf of the, the other property manager. This wasn't one that Rachelle was looking after because you're currently six days in rent arrears. And she said, the

• 11:50Speaker 00

  tenant said, oh, yeah, o- o- okay. And so we explained a little more how it looked like you missed a payment here on this date. And the tenant sounded really shocked. They were like, oh, sorry. I, I didn't know that. I'll have a look. Okay. And so we talked through some details. The tenant was like, oh gosh, yep, sorry about that. And so that worked really, really well because I was like, well, this tenant didn't mean to miss this payment. They didn't even know. Like you can tell if somebody sounds genuinely surprised, right? And so like, okay, we, we can give this tenant the benefit of the doubt because they're saying that they, they want to catch up. And so we agreed to a bit of a payment plan around when they would make certain payments. But it was clear, we didn't need to go nuclear

• 12:32Speaker 00

  with these guys, right? Like, we don't need to be too tough because they are being very on board, wanting to sort out the fact that they just happened to miss something without even knowing it. But I'll play you one more because this one really changed my mind about how these calls can go. So we called up a tenant and we said, hey, look, you're a bit behind here. And he said, look, it's been a bit hard. I've contacted the property manager a few months ago saying I'd put in so much a week, but to be honest, I haven't kept up to date with that payment plan because, you know, I put in an extra 25 bucks a week, but,

• 13:12Speaker 00

  but I can't do that. He said, but I can start putting in, I don't want to say 50, but I think anywhere between 30 and $50 until Wynn sorts me out for some part-time work. And so we talked about some options with Wynn's, but we said, hey, look, don't commit to 50 bucks a week if you don't think, if it's going to be too much of a stretch, what we should do is could you do 25? He said, I can definitely do 25 a week. We said, okay, we'll go to the tenancy tribunal, we'll get what's called that mediated order. So they'll call you up and say, did you agree to pay them an extra 25 bucks until this is paid off? You'll say, yes, all good. And then the payment plan is agreed to. You can put extra money in, but you can't go less than the 25 bucks. So let's not agree to

• 13:55Speaker 00

  something that you can't afford to do because that's going to put you in even more strife. So we went through that process, but the amazing thing was what happened at the end. And I want to play you our reaction to it.

• 14:06Speaker 02

  I think it was really good. I think he owned it straight away, which is the most important thing. He was obviously very aware of it, which is good. And he came up with a solution and said straight away, look, I can't really afford much. I am going through some things, but this is what I can do. We're totally happy to work with people as long as it is something that they stick to. If it was the case where this is the first time he was in rent arrears, we would probably go, okay, yep, no problem. But because he said he had committed to that $25 a week previously, and I can see that it wasn't quite stuck to all the time, it's now at the point where we will get a fast track mediator's order through.

• 14:44Speaker 00

  But the thing that struck me at the end was when we were wrapping up, he said, thank you so much for that. That alleviates a lot of stress.

• 14:54Speaker 01

  Yeah. See, it's pretty hard when you hear about like, you know, people losing their power, people stressing about not being able to pay their rent. The tenants are humans too. Most of them by and large are awesome. And sometimes they are just having some, a tough time. And it's better to help that person out for their sake. But also then you could have a tenant who's incredibly loyal later on because you, you actually would kind to them in, in the moment that they needed it.

• 15:19Speaker 00

  And in this case, the tenant was very aware of what was going on and he would, obviously was stressed. He didn't know whether we were going to come in with a great big bulldozer and kick him out and take a very aggressive approach.

• 15:32Speaker 01

  Thank Christ he doesn't remove people from houses.

• 15:35Speaker 00

  But, you know, he wouldn't know, are we going to take a really aggressive approach with them? Or are we going to take an approach where we're trying to work with them? And in the end, he was like, that was really nice that before a long weekend, we were able to sort this out and he could just think, okay, I've got a plan. Now I can stick with it. And I think that this is one of the, the main reasons people hire a property manager rather than managing it themselves. Because then you do have to deal with these rent arrears calls when they come up. And if you don't know the process around mediated orders or, hey, look, cool, we're nine days in rent arrears, it's time to apply to the tenancy tribunal. We've already issued a 14 day notice and actually mediations are a little bit slow at the moment. So let's get this process going now. But unless you're dealing in that

• 16:19Speaker 00

  every day, it can be quite an uncertain process that you're just not familiar with. So if you are looking for a property manager, you might consider Rachelle's team at Opus Property Management as well. But over the last 15 minutes, you've come with me as we went in the field to see what to do when the tenant doesn't pay the rent. You heard what property managers actually say to the tenant and what happens if they still don't pay. Right, let's wrap it up there. But please don't forget to rate, review and subscribe to the podcast. Really does help us get the message out to more people.

• 16:55Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Deb at night.

• 16:58Speaker 01

  And I'm John Akle.

• 16:59Speaker 00

  We're going to be back again tomorrow with even more daily strategies, tactics and insights to help you get the most out of the new selling property market. Until next time.