Hi everyone! I have a question for those experienced in dealing with council rates. Last year, we fell behind on our rates payments. The council reached out in June and warned us that if we didn’t pay up, they would contact our mortgage provider. This caused us to panic, and we ended up paying the total amount owed. I’m still curious: if the council had contacted our bank, what would have happened? Would the bank cover the payment to the council directly, or do they have some sort of arrangement with the council? Just trying to understand what could have been the outcome here. 
According to the Banking Ombudsman’s website, the bank would have simply debited your accounts to cover what you owed the council.
On a side note, we’ve switched to paying our rates via direct debit every two weeks, and it’s been fantastic! The council adjusts the payments automatically, so we avoid any surprises each quarter.
Councils, WINZ, IRD, etc., usually accept realistic payment plans if you can’t pay off the debt right away.
In reality, you would just enter into negotiations. Unless you completely ignored their communications, which can lead to the bank making the payment on your behalf and then billing you.
It takes quite a commitment to ignore council correspondence to reach that point.
@Val
Yeah, we really dropped the ball on that one—totally slipped our minds. Not exactly our smartest moment, haha.
Nico said:
@Val
Yeah, we really dropped the ball on that one—totally slipped our minds. Not exactly our smartest moment, haha.
Setting up automatic weekly payments can help.
Nico said:
@Val
Yeah, we really dropped the ball on that one—totally slipped our minds. Not exactly our smartest moment, haha.
We once forgot to open our mail for about six months; it just piled up in a drawer! 
Nico said:
@Val
Yeah, we really dropped the ball on that one—totally slipped our minds. Not exactly our smartest moment, haha.
I had my quarterly rates assessments sent to a PO Box I rarely checked.
I ended up with several 10% penalties that really hurt! Now I’ve switched to monthly direct debits, and I haven’t missed a payment or incurred penalties since.
Mortgage holders are required to pay any arrears. The bank will then pursue the borrower for that amount.
In Christchurch, there’s a 10% penalty for late payments, which is enough motivation to ensure timely payment.
For those who own their homes outright, councils can eventually force a sale for unpaid rates. However, it’s quite rare for homeowners to reach that point. Just recently, Auckland Council went through a forced sale for a home over a significant unpaid rates bill.
Some banks might deduct any outstanding rates directly from the account used for mortgage payments if you fail to make arrangements within 90 days of the council’s demand. This could potentially lead you into an unarranged overdraft situation.
Ultimately, the worst-case scenario would be losing your home, but that usually only occurs if you neglect both the rates and the mortgage.
Some councils have a rates postponement policy. You might want to inquire about that. Essentially, it’s like a reverse mortgage where they accumulate the debt with interest against your property.