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Article for the Magazine for December 2007
What is the real dollar cost of  delays in Tenancy  Tribunal hearings?

Recently I identified in an article what most Landlords knew already, which was that Tribunal hearings have fallen behind significantly. This article looks at the real cost of those delays.

Anecdotally landlords say that most money orders made by the Tenancy Tribunal remain unpaid. The civil debt enforcement system is seen as time consuming and user unfriendly. Most creditors who are landlords, simply write the amount of the rent off as a lost cause. In the 2004/05 Annual report produced by the Department of Building & Housing it referred to the total number of applications to the Tribunal as 45,362. It is important to remember that there is always a number of cases of under / non reporting so the actual numbers of terminations involving rent arrears will always be many more than the official figures.

Of that number 90% are landlord applications or about 40,000. Of the 40,000
75% or 30,000 are usually for termination involving rent arrears whether or not it is dealt with by mediation or the Tribunal. Of the number of  Tribunal hearings 23,000 three quarters or 17,500 are likely to be by landlords for rent arrears.
    
Historically after filing the application the wait for a hearing in most areas averaged about three weeks. Recently however the wait for a hearing has extended out to about six weeks.

Landlords have no option but to use the Tenancy Tribunal , it has a monopoly by law so even when the delay is unreasonably long, as it is at the moment both landlords and tenants suffer. Landlords suffer because they lose more money and tenants suffer because they incur a larger debt  which might adversely affect their future credit record. 

What is actual cost of the delay alone, to landlords?

Most applications for terminations are brought on the basis of  rent arrears. The threshold for filing is 21 days rent arrears. Accordingly the cost of rent arrears because of the legislative threshold is  21 days x  17,500 x  av  rent of $300 = $15.7 million.                          .
Landlords file their application with Tenancy Services and then have to wait for a hearing
and the rent debt just gets bigger with every day they have to wait.

Anecdotal evidence suggests the waiting time is currently nearer six weeks rather then the three as it was earlier in the year, so the financial cost to landlords for the waiting time alone is double the threshold or  $31.4 million. When the termination order is made at the Tribunal the termination date is rarely made the same day as the hearing but a few days hence. It would therefore be relevant to add 2 days to the total.

In a worst case scenario and   the tenant refuses to leave there is a further 2 day delay built in to the District Courts Act. 
 
Even when  the landlord does everything correctly after the tenant accrues rent arrears
the probable loss of rent is:

	Days		Rent		No of  hearings	Dollar cost
Days lost to the threshold	21	X	300	X	17,500	$15,750,000
Days waiting for hearing	42	X	300	X	17,500	$31,500,000
Days in the Order	02	X	300	X	17,500	$750,000
Days for eviction	02	X	300	X	17,500	$750,000
Total Days	67				Total Cost	$48,750,000

These figures are conservative because they do not take into account those dealt with at mediation some of which will be successful and some will not.  Landlords collectively lose well in excess of $48 million  per year in awards of rent arrears.

 A Landlord who rents a dwelling at $300 per week and that tenant fails to pay the rent and stays until the Tenancy Tribunal process has removed him /her can expect to lose approximately  $2871. This article looked at the cost of  the unacceptable waiting time delay in the system. My conclusion is  that  landlords can expect to lose an extra three weeks waiting for a hearing and that cost will be at whatever is the rental tariff.

In the test case above it works out to be three weeks at $300 or $900. The continuing delay in providing prompt mediations and hearing dates  is totally unacceptable. How long will landlords continue to accept such loses without demanding accountability from those in charge? The delays have going on since June, and if the present administration cannot fix the problem, perhaps it should be given to some new  blood who can?   
 
Scotney Williams
Principal
Tenancy Practice Service.