Self-employed tenants are now a landlord's biggest risk after a law change making it easier to deduct unpaid rent from an employee's wages, an expert says.
Craeg Williams - who says his company TPS Credit Control is the country's biggest unpaid rent collector - says a little-noticed 2014 law change allows courts to issue attachment orders requiring employers to pay an employee's unpaid rent out of their wages without holding a hearing.
Similar orders can be issued requiring Work and Income to pay a beneficiary's unpaid rent out of their benefit, but Mr Williams said the hardest group to get money out of was the self-employed.
"As a landlord, I would always veer away from dealing with a self-employed business person in almost any circumstances, because if they decide I'm not going to pay the amount, you're never going to see the money again," he said.
The Auckland Property Investors Association has figures showing that unpaid rent was the issue in 28,725 of the 34,504 applications to the Tenancy Tribunal by landlords last year.
Tenants applied to the tribunal in only 3701 cases.
Mr Williams said the average amount of unpaid rent by tenants was $2000, but many owed more than that.
"One woman we're chasing has 20 tenancy debts. Another owns a car yard in Central Auckland and owes $10,000 in rent. He simply laughs and hangs up on us when we ring," he said.
The 2014 law requires courts to serve a copy of an application for an attachment order for unpaid rent on the tenant.
But it says the court "may make the attachment order even though the other party has not had the opportunity to make representations to the court about the application".
"Prior to 2014 you had to have personal service by a bailiff and a hearing in the District Court where the registrar would look at the person's means," Mr Williams said.
"The problem with that was that most people didn't bother to show up to the hearing, and that would result in an arrest warrant being issued that went nowhere.
"So now you don't have to have a hearing, you can get straight to the attachment order. That's faster, easier and cheaper."
But he said it was much harder to get unpaid rent from a self-employed person who simply refused to pay.
"The system is unfortunately toothless when it comes to self-employed people," he said.
He said landlords could force a self-employed tenant into bankruptcy, but that would cost $2000 to $3000 to recover a debt that might not be much more than that.
His own solution as a landlord was to require a self-employed tenant to get an employed guarantor.
"That is going to be reasonably insulting to some people," he said.
Auckland Tenants Protection Association manager Angela Maynard said she was concerned at the invasion of a tenant's privacy when an attachment order was served on their employer.
"It's another way of the landlord having control over the tenant."