Tenant selection turned into a lotto draw

  • Ill-conceived guidelines poorly thought out by Privacy Commissioner

  • Potential lotto draw for tenant selection created

As if we didn’t have enough to deal with!

Ten months on from the infamous story of the ‘KFC Test’ for tenants making the headlines, the Office of the Privacy Commissioner (OPC) dropped yet another bombshell on an industry that continues to find itself struggling to cope with the amount of change thrust upon it.

This month, without prior warning or involvement from industry organisations such as REINZ or IPMA, the OPC released new guidelines that Property Managers and landlords should adopt when selecting a new tenant.

Their advice, if followed to their recommendations, almost turns tenancy selection into a lotto draw. Want the property? Just put your name in the hat, don’t worry about it, you never know your luck.

As Bindi Norwell, CEO of REINZ stated, guidelines are good. However, there are discrepancies and she was also critical that as a body, they were not consulted with before the release of the OPC guidelines.

 

Tenancy selection could become as basic as drawing a number out of a hat.

Why do we have new guidelines?

Last year, as the letting fee ban was making its way through Parliament, Property Manager Rachel Kann made an oral submission to the select committee. When asked about how the Government could assist with tenants, her suggestion was around budgeting.  She stated that she identified the poor spending habits of prospective tenants. This information was provided to her on bank statements of prospective tenants provided to her when applying for a property. According to Rachel, KFC seemed to be more of a priority to some of her prospective tenants than paying fines and rent. Unknown to Rachel, NZ First MP Darroch Ball who sat on the select committee, was not impressed by her admission and in August last year, he released a copy of the recording of her submission to the media.

The news made national headlines and yet again our industry was projected into the spotlight. It also alerted to the OPC practices around tenancy selection and they naturally had concerns. Jon Duffy, Assistant Privacy Commissioner at OPC, highlighted in an article in August 2018 that landlords and Property Managers may be asking for too much information.

The consequences of this are a potential breach of the Human Rights Act and the Privacy Act. There are serious penalties for breaching both of these acts.

Unknown to everyone within the Property Management industry and apparently also to Tenancy Services,  OPC had been working on new guidelines that landlords and Property Managers need to follow when selecting tenants. When the guidelines were released on the 14th of May, it certainly raised more than a few concerns with some believing if followed to their recommendations, it turns tenant selection into a lotto draw.

"Privacy Principal One:- Purpose of collection of personal information

Personal information shall not be collected by any agency unless

(a) the information is collected for a lawful purpose connected with a function or activity of the agency; and

(b) the collection of the infortmation is necessary for that purpose."

What is in the new guidelines?

OPC released the guidelines to help clarify questions that they were receiving following ‘KFC’ gate, one wonders how many questions they received. However as is often the case, releases such as this sometimes bring up more confusion and questions rather than clarity.

GUIDE TO PRIVACY COMMISSIONER GUIDELINES

OPC has categorised three different groups as to what information you can collect before deciding whether you will select a tenant.

  • Always Justified
  • Sometimes Justified
  • Almost never Justified

They then go on to state the information that you can collect after you’ve selected the tenant.

What set alarm bells ringing was some of the items that fall into the never justified category. Many of which are commonly obtained.  Also, seeking income verification and or a credit check report is only sometimes justified. Try telling that to the landlord who had a tenant with a bad credit rating default on rent.

All of a sudden, the following items that are often stated on a Tenancy Application Form have become almost never justified.

  • Driver licence number (Drivers licence as proof of ID)
  • Nationality or citizenship (Passport as proof of ID)
  • Marital and family status (names of applicants include children)
  • Gender (look at the name and ID, pretty easy to figure this one out!)
  • Details about current accommodation
  • Employment history and status (looking here at the proof of income and stability)
  • Age (proof of ID and in contradicts section 14 of the RTA)

Look at the majority of Tenancy Application forms, particularly from the big companies such as TPS and Tenancy Tracker, if you are applying for a property to rent, you will always have to submit the information that is almost never justified.

Tenant selection will become increasingly complex if the new guidelines are enforced by Tenancy Tribunal

Confusion reigns as lack of consultancy hinder guidelines

Reviewing this, what is always or sometimes justified to be obtained by potential tenant conflicts with what is never justified to obtain. Let’s look at some examples.

Name and proof of ID: This is categorised as always justified.  you are free to ask for name and proof of identity. However, how can you verify someone’s ID if you cannot obtain the most common forms of ID?

  • You cannot ask for a Driver’s Licence number (an official form of ID)
  • You cannot ask for nationality or citizenship (that rules out passports!)
  • You cannot ask for age so this will rule out all forms of official ID.

Martial and family status: By filling out an application form, you will be naming who will be residing at the property and naturally, applicants will be by default, telling you if they have children or are married. Knowing the age of children is a default requirement for any prudent Property Manager and landlord as you should be stating how many people can reside at the property.

Current income verification: This is alarmingly only sometimes justified. To verify income, you will be either declaring that you are on a benefit, you are a student, or you will be providing a payslip. So, by doing this, you are by default obtaining someone’s employment status.

Name and contact information of current landlord: You are always justified in collecting information with regards to their current landlord, however, you cannot obtain information about the current accommodation and rent.

With regards to the later, you can imagine your conversation with the tenant’s landlord. How do you verify who the landlord actually is without checking the current address?

The prospective tenant could put anyone as their current landlord and you simply have to take the tenants word for it. By verifying that the landlord is who they say they are, you will be breaching OPC guidelines.

Credit check? only sometimes!

Amazingly, according to the OPC, a credit check on a prospective tenant is only sometimes justified. This, to me, seems ridiculously short-sighted. In the last 12 months, we have seen over 13,000 Tenancy Tribunal hearings and one-third of these involve rent arrears. If we did not do credit checks on prospective tenants, then this number would potentially increase. There is simply no point in putting a tenant into a property if they cannot afford to pay the rent and creditworthiness is a vital component of tenant selection.

Rent arrears management starts at tenancy selection. When I was first placed in a position to run a rent roll, arrears management were a real issue. Approximately 20% of tenants were in arrears meaning one in five tenants were behind on rent. We introduced two policies that helped reduce arrears.

  • Introduction of a zero tolerance to arrears. If you missed one week, we applied to Tribunal. No exemption.
  • Introduction of 100-point criteria around tenant selection. This was based on the following.
    • Proof of ID (now never justified)
    • Proof of Income, this is typical WINZ statement or payslip but you could provide a bank statement to verify income. (now never justified)
    • Verification of current address (now never justified)
    • Professional or current landlord reference (cannot seek information on current employment so now never justified)

The results of introducing this policy were stunning. Within 5 years of implementing these policies, in the final calendar year, we had collected over 99.7% of all rent due.

The importance of proof of income

I cannot stress the importance of verifying a prospective tenant’s income. This is not just for the landlord’s benefit; it is also for the tenants. There is no point in putting a tenant into a property that they cannot afford. The outcome can be financially and emotionally crippling for all parties involved. If you cannot verify their income then, we are not only exposing landlords to unnecessary risk, we are exposed tenants to the risk of bad credit and history in Tenancy Tribunal and losing their home.

Property Managers would work under the instructions that no tenant should be accepted for a property if the rent was more than 40% of their net income. If it was more than this, the tenants simply could not afford rent and by placing them into a property showed a lack of care and responsibility on behalf of the Property Manager for all parties.

By neglecting this policy, it would expose the company to litigation as we had not carried out proper due diligence in our tenancy selection process. Landlords with ‘Loss of Rent’ insurance policies would not be able to make a claim as we had been negligent in our tenancy selection and landlords would hold the company responsible. Rightfully so!

Application forms for tenants from Victoria, Australia are not justified according to our Privacy Commissioner. They ask for age, employment status, salary.

Getting the balance right

There is no doubt that guidelines will help landlords and Property Managers to implement best practice policies around tenant selection, however, a collective discussion involving all the industry stakeholders, whether they be private or public, would have been a far more favourable process. What we now have is confusion and uncertainty created unnecessarily so.

Yes, improvements can and should be made. This also involves how we obtain references. If you are providing a reference, how do you know prospective tenant gave permission allowing the landlord or Property Manager authority to do so? I’ve no doubt that there are breaches of the Human Rights Act and the Privacy Act when we do select tenants, however, this is probably more likely through negligence rather than anything more sinister. A collaborative approach would have been far more beneficial.

Now, we again have an industry looking at each other, scratching our heads and wondering where to go from here.

We have obtained Tenancy Application forms from Australia including their official application form from REIWA. We also have application forms from the UK to compare to see if we are asking for too much information. They currently are asking for exactly the same information as we are. So are they breaching current legislation as well?

OPC should have engaged the industry in designing these guidelines. The confusion that they have created could have easily been avoided.

Regards

David Faulkner

 


Who’s Liable when the Tenant claims? Property Manager v Landlord

  • This month we ask for clarification on who Tribunal should hold responsible for breaches by the landlord

  • Potential increase in tenant claims could lead to millions being awarded in exemplary damages

Who’s liable? It is a very simple question when a tenant makes a claim to Tribunal, yet somehow, no one seems to be able to give a definitive answer. When a Tribunal makes a decision in favour of the tenant, and money has to be paid to the tenant in way of compensation or exemplary damages, who is responsible?

Expect to see more tenants taking their landlords and Property Managers to Tenancy Tribunal post 1st July. The question we are asking is if they are in breach, who should pay?

For years now, I have followed decisions that come out of Tenancy Tribunal. They make for great case studies to use in training Property Managers. We read the documents to assess how the adjudicators came to their conclusion and how they interpret the law. However, in the years that I have researched cases, it seems like it is a lottery as to who has to front up with the penalty. It is more relevant now than ever, especially after the Tenancy Compliance and Investigation Team (TCIT) have made it perfectly clear who they are going after. They are targeting the Property Management companies and are of the belief that they should pay.

With the 1st July 2019 deadline approaching for insulating your rental property, we are expecting to see some opportunistic tenants waiting to pray on unsuspecting or simply pure arrogant landlords who haven’t ensured their properties are compliant and insulated to the new standard.

Tribunal cases set for an increase?

This could lead to a surge in Tenancy Tribunal cases as tenants, quite rightly, exercise their rights. The carrot of being awarded $4,000 in exemplary damages is a substantial one and I would encourage tenants to do so if their rental property is non-compliant. It’s not as if landlords haven’t had time, they have had three years to get properties insulated and ready. Yet clearly, we are not going to have our entire rental stock ready by 1st July 2019. We predict as much as 10% of rental properties will not be insulated and this is approximately 60,000 houses. That is $240 million of potential exemplary damages.

So before this deadline hits, we want to get clarity as to who should pay and we have a few questions that need answering.

  • Who is liable - the landlord, the Property Management company, or is it both?
  • Are decisions assessed on a case by case scenario, allowing the adjudicator to make the call on the day?
  • What is the protocol that adjudicators follow in making these decisions?

Let’s start with the first question. Who is the landlord?

The best place to start is to look at some of the key sections and interpretations within the Residential Tenancies Act.

We should all know that the Property Manager acts as Agent for the Landlord, it should state this on the Tenancy Agreement. But, what does that mean?

Section 2 of the RTA defines the landlord as follows.

“in relation to any residential premises that are the subject of a tenancy agreement, means the grantor of a tenancy of the premises under the agreement; and, where appropriate, includes—

  • a prospective landlord; and
  • a former landlord; and
  • a lawful successor in title of a landlord to the premises; and
  • the personal representative of a deceased landlord; and
  • an agent of a landlord

So, by signing a Management Authority with the owner of the property, the Property Manager becomes the agent of the landlord. Therefore, according to the RTA, the Property Manager becomes the landlord.

Straightforward enough, but does that mean that the owner of the property has abdicated all care and responsibility to the agent? Of course not, they are the owner of the property and therefore they are a business owner making them the principal of the business. This means they have responsibilities not just under the RTA but under many pieces of legislation including the Health and Safety at Work Act.

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A principal of any business cannot abdicate full responsibility to a third party and ultimately, they are responsible for the performance and compliance of the property. In the case of a Property Management company, they physically cannot make a landlord comply, as many are finding out trying to get a small percentage of landlords to insulate their properties without success. Along with all the other day to day tasks that a Property Manager undertakes, they also act as an advisor and consultant to the owner of the property.

The issues we have faced with insulation is a prime example. Most landlords with properties under management would have arranged/agreed for their properties to be fully insulated and compliant by now. However, there is a small percentage of landlords who simply have ignored requests from Property Managers. Why should a Property Management company face exemplary damages of $4,000 when they have done everything in their power to get the landlord to comply?

I have never been convinced that it should be the Property Management company who carries the burden when a landlord ignores a recommendation and potentially exposes the agent to risk. Sometimes I feel as though there is a temptation for adjudicators to target Property Management companies as they are an easy target.

We see many different cases where adjudicators make decisions on who is liable for damages award to the tenant.

However, I do also understand why TCIT would target Property Management companies. It will make them think twice about managing non-compliant properties.

In order to help us get some clarity into where the liability falls we have reviewed two cases where the Property Management companies are held jointly liable but for two completely different reasons. We also highlight a third case where the landlord is liable and not the Property Management company, even though both are named on the application. This highlights the inconsistencies that can occur in Tribunal.

Case History: Mendez-Gray v Jennes and Realty Link Taupo T/A LJ Hooker

One of the main reasons I feel that this is a major issue that needs resolving is because of the mixed messages we get out of Tenancy Tribunal. This case in particular highlights what needs to be stated on the Tenancy Agreement to remove the liability of the Agent and put it firmly with the Principal.

In the height of the Methamphetamine scandal, one case stands up and needs further examination.

In August of 2016, LJ Hooker had to pay Elena Mendez-Gray the sum of $6,788.44. The background of the case was that the landlord had seemingly known that her property was likely to be contaminated with Methamphetamine but had not disclosed it to the Property Management company. Subsequently, the tenants found out that it was over the legal limit set at the time of 0.5 micrograms. The tenant’s won the claim.

Adjudicator D Malcolm ordered both the landlord and LJ Hooker to pay the tenant.

However, in the order, Adjudicator Malcolm exonerates LJ Hooker of any wrongdoing. What LJ Hooker did wrong was that they declared themselves as the landlord on the Tenancy Agreement and not the agent for the landlord. The adjudicator then goes on to state that in common law, where a contract names the agent and discloses the principal, there is a prima facie rule or presumption that only the principal can sue and be sued. However, due to the fact that LJ Hooker did not disclose that they were acting as an agent for the landlord, this made them jointly liable.

Case History: Lovell v At Homes Rentals Ltd and Turner

In this case, At Homes Rentals Ltd and Turner had to pay Lovell $3,870.44 in exemplary damages and compensation for a number of breaches of the RTA.

The case was held in Tauranga in April 2018 and the adjudicator was J Smith. In the order, adjudicator Smith gives a lengthy summary on who is the actual landlord and who should the damages be awarded against.

In his summary, the adjudicator states that in common law the primary rule is that an agent who acts purely as an intermediary for a principal is not a party to the contract between the principal and the other party. In this situation, the agent cannot sue or be sued on the contract.

However, the adjudicator then quotes a section from the book Residential Tenancies: The Law and Practice by David Grinlinton.

“Often real estate agents manage the landlord's property, and in such case, proceedings would normally be taken in the name of the landlord rather than the agent. However, where an agent's name appears on the tenancy agreement as the landlord, the agent may be jointly and severally liable with the landlord, and proceedings may be brought directly against the agent. Such liability may be avoided by including the words "as agent for" or "on behalf of" (the landlord)".

The adjudicator then goes on to explain the definition of a landlord as stated in section 2 of the RTA. In the definition, we stated earlier the words ‘where appropriate’ appear. Smith argues that ‘where appropriate’ was specifically written to suit residential tenancy cases. So, where an agent signs a tenancy agreement for the owner and is fully engaged in the day to day management of the tenancy, the agent will usually be a landlord for the purposes of the RTA, particularly where the agent’s action or inaction is part of the tenant’s claim. In these circumstances, the agent may sue, and be sued by the tenant.

Clear as mud!!

Case History: Knowles v Blue Ribbon Realty Ltd and Jordan

In December 2018, the tenant of a Te Awamutu property won compensation as the landlord had failed to maintain the property as it was cold, damp and suffered from a mould issue. The carpet was rotting due to water damage and the tenant also provided evidence of gaps in the ceiling, letting in daylight.

Adjudicator Lang awarded $2,250 to be paid to the tenant by the owners of the property Magda and Brett Jordan and not Blue Ribbon Realty Ltd. In the final statement, Adjudicator Lang states that the party who is liable for maintenance failures is the owner of the property. Therefore they have to pay the sum award and not the agent.

Consistency and clarity required

This is no criticism about how adjudicators interpret cases, they will each have their own views and clearly, they will not always agree. However, from a Property Managers point of view, it is an area that certainly needs clarification so everyone knows where the liability falls moving forward. This surely is not too much to ask.

If a Property Management company faces exemplary damages of $4,000 post 1st July and that company has done everything in its power to get the landlord to comply, it could be a worthy exercise as an industry to invest in a bloody good lawyer. They could then to argue in an Appeal to the District Court that Tenancy Tribunal is wrong and all exemplary damages and compensation should be awarded against the principal. Even if the appeal failed, at least we would know where we stand.

Principal Tribunal Adjudicator Melissa Poole. It would be great to get clarification from her as to who is ultimately liable.

This is highly unlikely to happen but it is one way we could move forward and it would finally clarify who pays. No doubt, post 1st July we will find out how Tenancy Tribunal will rule and whether they will be consistent.

What we would recommend

I may not be a lawyer, but when you have researched a topic for a number of years, you do get to grasp a good basic understanding of how the RTA works. This, however, is an area I am still trying to find an answer to. I've even asked adjudicators after attending Tenancy Tribunal hearings if they can clarify who is liable. Hopefully, we can get clarity before the 1st of July kicks in.

What I believe should happen is as follows.

  • The common rules of basic law apply. The agent should be exempt from being sued by the tenant as they are acting as the agent. They are not the principal.
  • If the Property Management company is negligent in how they have operated, then this becomes a matter between the principal (the landlord) and the agent (Property Management company). The principal can then lodge a claim against the agent, ideally, through the Real Estate Authority.
  • The Property Managers will have to be licensed to represent the landlord as an agent.
  • Tougher penalties are required for exemplary damages. Penalties have remained the same for nearly a decade. Our opinion is that damages should be on a percentage of the annualized rent. This is much fairer as landlords who receive low rent income in places such as Invercargill face the same penalties as landlords who receive higher income in places such as Wellington and Auckland.
  • Tenant’s should also face a wider range of exemplary damages. There is nothing in the RTA that allows landlords to seek exemplary damages for willful damage to property or for serious breaches of the RTA such as assault. This should be included as it could be argued that the tenants have committed a criminal act.

As ever this is just an opinion piece and we welcome your feedback. Thanks for reading.

Regards

 

David Faulkner


Will the Rental Warrant of Fitness finally find a healthy home?

  • Will New Zealand follow suit of Wales and regulate landlords?

  • We believe the Rental Warrant of Fitness will be used as a tool to measure enforcement of Healthy Homes standards

After much discussion and debate, finally, we have the proposed standards announced for the Healthy Homes Guarantee Bill (HHG). The deadline will come a lot quicker for most landlords than what they will realise, particularly because any fixed term tenancies will have to comply within 90 days of a tenancy being renewed post 1st July 2021. We actually believe that it may not be achievable if landlords up and down the country do not act now and in particular with moisture barriers and insulation top ups.

However, what has yet to be decided is how the Healthy Homes Guarantee will be enforced and policed.

The Tenancy Compliance and Investigation Team (TCIT) are simply not going to have the resources to ensure that all properties comply with the HHG standards and an alternative tool for measuring compliance will have to be developed and implemented to ensure that landlords fulfil their obligations under the new standards.

This is where the Rental Warrant of Fitness (RWOF) will likely finally find its home.

Wellington introduced the voluntary Rental Warrant of Fitness scheme. Take up has been virtually zero

Whilst the dates have been confirmed for compliance, Government is still to decide on what documentation the landlord will have to provide to prove compliance. However, the obvious document to use will be the RWOF which was developed by Prof. Phillipa Howden-Chapman and her team at Otago University. The RWOF has been over a decade in the making and has been financed by public funding. It was developed due to the poor condition of many of our rental properties across the country and the obvious health concerns of people living in these properties. It has powerful support within the political circles both at a local and national level.

Wellington City Council launched a voluntary RWOF scheme after Mayor Justin Lester was elected nearly three years ago, though it has to be said, take up has been embarrassingly poor and the scheme can only be described as a flop. However, that is not to say that the scheme will not work or will not find a purpose if it is made compulsory. The HHG standards will have to be monitored and policed with implementation being registered, and the RWOF could be the perfect tool to do this.

How will the Rental Warrant of Fitness work?

 The RWOF manual makes a recommendation that rental properties will need to be assessed every three years and the concept is similar to the Warrant of Fitness you undertake for your car. At this stage, the RWOF covers 29 separate criteria and is a simple pass/fail concept, meaning that the property will have to clear every one of the 29 criteria to pass.

Although the criteria will have to amend slightly to cover off the Healthy Homes standards, it will become the perfect tool to cover off compliance of rental properties. Similar proposals are being made in the UK where we see more compliance around rental properties. Each property has to have an Energy Performance Certification (EPC) and this must reach a minimum standard in order to be rented out. On top of this, there has been a proposal that all rental properties undertake a ‘Property MoT test’ to tackle sub-standard rental properties. Here in New Zealand, we seem to follow similar trends in regard to the UK property legislation and we see no reason why this wouldn’t be the case here.

What the process may look like

  • At commencement date of standards, all rental properties will have to undertake the RWOF to assess compliance.
  • If they pass, a certificate of approval will be issued and displayed so any tenant or prospective tenant will see that the house is compliant.
  • If they fail, the landlord will be given a timeframe to ensure that the property comes up to standard or they will be in breach of Landlords Responsibilities and may face exemplary damages as the house will not be fit for purpose.
  • If the house continues to fail the RWOF, Tenancy Tribunal may issue a work order to ensure that maintenance is carried out so it will pass or else it will not be able to be rented.
  • Assessors will be trained, certified and registered. These potentially could be Property Managers though there may be issues around a ‘conflict of interest’ if they are managing the properties that they are assessing for compliance.
  • Every three years, a WOF will be undertaken which will include measurement of insulation to ensure that any degradation is identified and ‘top-ups’ are undertaken as and when necessary.
  • Tenanted properties that do not have a WOF undertaken will be ‘red-flagged’ and will be reported to the Tenancy Compliance and Investigation Team.

Should a national database of landlords be developed?

 The obvious issue that arises with the implementation of such a policy is how do you identify the rental properties? The likelihood is rogue landlords will simply just ignore the scheme and will take the punt that they will not get caught out. With an estimated 400,000 landlords in New Zealand, there will be obvious issues around monitoring and identifying everyone. If only a handful of landlords participate in the scheme, then it will lose all credibility as has been the case in Wellington.

One solution could be to have a national register of landlords who will either have to undergo some basic training under the Residential Tenancies Act or they will have to engage a fully qualified Property Manager.

Once they have undertaken the training, landlords will go onto the national register as will their properties. Property Management companies who manage properties for landlords will also have to register the properties under management as well.

Wales regulates landlords

There is a similar scheme that has been developed in Wales. Rent Smart Wales was set up in 2015. If you are a landlord or an agent for the landlord, you have to be licensed under the Welsh Assembly to operate and this means compulsory training.

Frank Webster from the UK explains how Rent Smart Wales works at the Generation of Change Conference

There are clear benefits to implementing such a scheme. This means that landlords are better educated and understand what their rights and responsibilities are, and the initiative seems to have had some success. If a landlord does not want to undertake the training, they simply engage a qualified and registered Property Manager to take on the responsibility. The upshot is that tenants will be better serviced living in better quality rental properties and cowboy operators will be identified and put out of business.

There are other benefits as well.

At the moment, there is limited data available to monitor the actual real-time number of rental properties in New Zealand. Such a scheme will mean that regulators will be able to identify potential issues around supply and demand for rental properties and whether there are any trends around lack of compliance. We will also be able to identify easily what percentage of the housing stock is in the private rental sector.

If a landlord fails to register under this scheme, they will face exemplary damages, though the penalties landlords face at the moment simply do not go far enough.

At the recent Generation of Change Property Management Conference in Wellington, the keynote speaker from England, Frank Webster highlighted that authorities in the UK now have the ability to fine non-compliant landlords on the spot with penalties of up to 20,000 GBP. In New Zealand, landlords face a fraction of this under the Residential Tenancies Act and some landlords will analyse the cost versus risk and simply not bother. If penalties were more aligned to the UK, then many landlords will see the risk being too great and will comply.

The Rent Smart Wales scheme could be the answer to regulating landlords

There is obvious concern that many landlords may just sell up, leading to a greater shortage of rental properties across New Zealand. This is already happening, leading to unprecedented rent rises in many of our centres. In some central suburbs of Wellington, median rents have increased by as much as 25% in the last twelve months. This is unsustainable and not healthy for the country.

Other risks are that landlords will choose to use platforms such as Airbnb as there are not the same legislation requirements that landlords have to abide by. Governments around the world are tackling the Airbnb conundrum as this is also contributing to a shortage of rental accommodation in other places around the world. Our Government will need to be decisive to ensure that we do not see too much stock moving to the short-term market. Taxation and limits around the use of Airbnb are ways that cities and countries are dealing with this issue.

Are we overcomplicating the issue?

Throughout all the hot air that comes from both sides of the debate, there is a simple question that seems to be ignored.

Is it too much to ask that every New Zealander lives in a warm, dry and safe home?

In our opinion, this should not be too much to ask. Every Kiwi should be able to live in a home that is warm and dry.

If you are a landlord who thinks otherwise, then in you should really sell up and put your money elsewhere. If you are a Property Manager, leave the industry and get another job.

In our opinion, the Government has got the standards right and any good landlord who maintains their property should have no issue in complying with the new standards. The timeframe may be an issue as most tenancies we see are fixed term, meaning that compliance will be closer to 2021 rather than 2024. We also would not be surprised to see longer fixed term tenancies being utilised more to take the pressure off landlords so they can comply by 1 July 2024.

Places like Dunedin or in the deep south may struggle, especially many of the old student properties and we have highlighted this in previous articles, but long term, New Zealand as a whole will benefit.

What we have to ensure is that compliance is effectively enforced, and this will not be easy to do. The whole credibility of the standards will be put at risk if we fail to enforce these standards and New Zealand’s most vulnerable citizens continue to live in substandard accommodation.

The Timeline to compliance

Type of tenancy or landlord
The date of compliance
Private Rental Sector
  • The rental property will have to comply with the standards within 90 days of the renewal or start of a new tenancy after 1st July 2021.
  • All other cases will be 1st July 2024
Boarding Houses
  • A single compliance date of 1 July 2021
Tenancies under Housing New Zealand
  • These tenancies must comply by 1 July 2023

The Standards for the Healthy Homes Guarantee Bill

Standards Requirements
Heating The minimum achievable indoor temperature must 18-degree Celsius. A fixed form of approved heating in living spaces
Insulation The minimum level of the ceiling and underfloor insulation must have a minimum thickness of 120mm
Ventilation Ventilation must include openable windows in the living room, dining room, kitchen and bedrooms. Also, an appropriately sized extractor fan in rooms with a bath or shower or indoor cooktop
Moisture Landlords must ensure efficient drainage and guttering, downpipes and drains. If a rental property has an enclosed subfloor, it must have a ground moisture barrier if it’s possible to install one
Draught stopping Landlords must stop any unnecessary gaps or holes in walls, ceilings, windows, floors, and doors that cause noticeable draughts. All unused chimneys and fireplaces must be blocked.

 


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Fake reviews make real news!

  • News storyhighlights the risks of obtaining and creating fake reviews
  • We go through online etiquette and look how to manage reviews

The New Year has started where the old one finished off. Property Management companies in the headlines for all the wrong reasons. This time the Te Aro branch of Quinovic is back in the news following revelations that many of the reviews online are fake. Stuff.co.nz journalist Dileepa Fonseka released the story on the 20th of January and many individuals working for Quinovic franchises up and down the country must have thought ‘not again!’ when it appeared. This branch seems to be doing their best to commit commercial Hari-kari following their terrible faux-pas with the now infamous ‘Your Tenants may hate us but you will love us’ advertising campaign. Unfortunately, it looks like they have failed to learn their lesson.

Of the nineteen Google reviews it has received, fourteen come with 5 star reviews giving them a total average of 4 stars from nineteen ratings. So far so good. But when you take a closer look, twelve of those 5 star reviews look very, very suspicious.

They have all been made within a very short time frame and each of the twelve individuals has made two reviews of the same two companies. One of them is The Te Aro branch of Quinovic and the other is for Arlington Exchange, a small pawn broker from the city of Poughkeepsie in New York State. Now this may be a pure coincidence, but what are the chances of twelve individuals having properties managed by the same company in Wellington New Zealand, whilst also dealing with the same Pawn Broker in New York state, USA?

Even Donald Trump would have a job selling that story!

One must feel sorry for the many good people who work under the Quinovic banner. Their reputation has taken an absolute pounding over the last few months through the actions of one branch. One wonders how much more the powers that be will tolerate such behaviour from a rogue branch.

The Importance of the Review

Many companies fight hard to get as many reviews as possible. No problems with this, it just has to be done in an ethical way. The consequences of doing it wrong can be dire and the negative headlines could be the least of your worries if found guilty of breaching the Fair Trading Act.

Reviews on Google and Facebook have been hot topic in our industry for some years now as the world has moved from print advertising and Yellow Pages to the digital platform. It makes commercial sense to obtain as many positive reviews as you can as at some stage you will get the inevitable complaint and sometimes this happens when you have done nothing wrong. As an example, a tenant may have not had their lease extended due to a variety of reasons such as noise, antisocial behaviour or rent arrears. The easy way to get back at them is to slam the Property Manager on Google. ‘That’ll teach ‘em!’

Unfortunately it comes with the territory as in an industry that deals with the amount of conflict that we do, getting a 1 star review will happen at some stage as we live in a society of keyboard warriors and trolls.

Getting plenty of positive reviews will also help search engine optimisation or SEO as it is more commonly known. In an increasingly competitive market, everyone seems to be scrambling for a strong Google ranking and companies will spend thousands of marketing dollars using SEO companies to help boost their rankings on Google. Some will use Google AdWords but organic SEO is by far and away the most productive.

There is a saying that I have heard and it is probably very true, if you want to hide something, put it on page two of Google as no one goes there.

This is where the reviews also play their part. In many of the training and consulting sessions that we do up and down the country, we encourage clients to obtain reviews. This is by asking consumers whether they be tenants, landlords or anyone who has had a positive interaction with the company. Some do this really well with amazing success rates and this is just by simply asking people to review and making it easy for them to do so.

There are also companies that help businesses obtain and manage reviews such as Trustpilot by helping businesses collect customer reviews, display them in search, and drive more traffic. So, it does make real commercial sense to obtain as many good reviews as possible. Disappointingly however, some companies will get this wrong whether this is intentionally or unintentionally so. They could be utterly oblivious that someone has done something foolish. As we have recently seen, the consequences that may befall them could be catastrophic, whether you are large or small.

I have no doubt that many companies will now be reviewing what is being said online about them and developing policies around such conduct and behaviour.

Keep them real

When the news about the ‘Fake Reviews’ broke this week, Bindi Norwell, CEO of REINZ made the comment that by doing a fake review, you could be breaching the Fair Trading Act. She is right!

Section 9 of the Fair Trading Act states that ‘no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’. By obtaining a fake review you could be exposing yourself to a fine of up to $200,000 and the company could be exposed to the amount of $600,000. Many individuals who work in Property Management companies will be oblivious to this as will many consultants who advise their clients to do this. They may well be doing a review as a favour yet they could be exposing themselves to a serious breach that could put their careers and the companies future at risk.

So, we have decided to give you our recommendations in dealing with Google reviews and further advice as to how to behave on social media.

The Real iQ guide to dealing with Google Reviews and Feedback on Social Media

  • Develop an online review policy: Whether you are an organisation that is large or small, it is increasingly important to police what is being said about your company online. Once a review has been placed and it either looks suspicious or is negative, ensure that senior members of your management team are made aware and ensure you follow your company policy.
  • Ensure your staff are transparent when they review the business: You would be amazed how many staff members review the companies that they work for with a 5 star review and don’t add any wording to go along with the review - or rave about the company and don’t declare they work there. If your team members want to place a review best practice is to convey that they work for that company in the wording. There is certainly nothing wrong with saying that they love working for a company if that is the case - especially as property management superstars will be googling your business prior to applying for any future positions.
  • Make it easy for them to review you: There is nothing wrong with asking for reviews, particularly if you are doing an excellent job. Many people, particularly the ‘Baby Boomer’ generation which own many of the property that is being managed will be unsure how to leave a review. Make it easy for them to do so. A banner on your email signature, a link in a newsletter or even on your digital statement that you send them are great ways to get more engagement and more reviews. One office I have worked with have an iPad at reception where the consumer can leave a simple review when they come into the office. Simple, cost effective and engaging.
  • Too busy, get professional help: If you are too busy or do not know where to start, it may be worth getting companies to help obtain feedback for you. Trustpilot is one of the those companies that you can use.
  • Be careful in reviewing other companies: This has been done by a number of companies and in principal, I have no problem with this so long as you follow some strict guidelines.
    • Explain who you are and what you do
    • Explain your relationship with that company. If you are a referral partner, say so.
    • Explain openly and honestly why you are recommending them.
    • Do not pretend that you have used their service when you haven’t.
  • Respond to all reviews, good and especially the bad: It is imperative that you respond to feedback, particularly bad comments but there is a way to do so. Too often, we get rapped up in the emotion and feel as though we are being attacked, sometimes unfairly so. The best way to deal with bad reviews is as follows.
    • Review what happened, you should be aware of the issue. Is it a tenant or a landlord and are we at fault?
    • How serious is it? Once you know what happened and who they are, look at the scale of the complaint. It could be someone just venting because they missed out on a property, it could be a landlord with a more serious matter.
    • Decide on a response. It may be easier to contact the individual directly to see what you can do to resolve the situation and put things right. If you can do this, only ask them to remove the review once you have rectified the situation. Remember that you cannot make them take it down and if they refuse, accept it.
    • Write your response carefully. Do not attack them publicly, this is highly unprofessional. If there is a genuine mistake and you acknowledge this publicly, most reasonable people will accept this. We are all human and we have all made mistakes.
    • Thank them. Whether it is good or bad, thank them as they have given you an opportunity to learn. As Bill Gates said ‘your most unhappy customers are your greatest form of learning’.
    • Learn from it and move on. Don’t beat yourself up after a bad review. Yes, it hurts and if it is your business or it is aimed at you , naturally you will take it personally. However, so long as a lesson is learned in the long term it will benefit you. You cannot change the past, but the past can influence how you may act in the future.
    Probably one of my favourite responses to a bad Property Management review. A great response putting humour into a rather embarrassing situation. Any reasonable person will be able to make light of what has happened. However, without the response from the owner, who knows what conclusions the public would have come up with.

    What about Facebook and Social Media?

    Facebook is an other source of reviews and recommendations. I have to admit I am less and less a fan of social media and in particular Facebook, but that is a different discussion for a different time.

    However, at least with Facebook you can have some control over what is being posted and said but once something has been shared, it is out there. The reviews that a business receives on Facebook has now changed and they are now called recommendations. A Facebook page rating is based on a number of factors. These include recommendations, likes, and shares. You again, have to be careful as to what you put onto your Facebook page and your company should have a social media policy. You need to develop engagement yet in Property Management, the trolls are increasingly out in force and any wrong type of comment made on Facebook could be met with a barrage of abuse.

    Also you have to be aware if any of your team do something unethical on Facebook. It is very common to see these posts shared and screenshots of the posting taken and then recycled. Once it is out there, its out there!

    Facebook makes changes

    You will see this new update when you visit a company Facebook page. It is well worth having a look at how things have changed.

    Facebook has recently made changes to how your clients can review you. They now have a tab asking if you would recommend this business. You click yes and then type in the comments that you want to make. If there are any poor reviews, you can respond and also ask that they be taken down.

    My view is that Facebook and Instagram should still be a platform to promote company values and culture. Share what your team are up to, what community work you do and educate your potential consumers about all types of things that may help them.

    I see too many Facebook pages that are truly boring with nothing about what the team are up to and little online engagement. They use it as a tool to promote properties but you will get little traction from this if consumers are not engaging with your page. Use it to promote properties but do not overkill this and certainly not every post. Also, look to engage with any feedback you receive through your Facebook and Instagram pages.

    Also, use LinkedIn. This is my favourite social media platform and I find many interesting articles on there. It is an under-utilised place to seek endorsements from fellow professionals and you don’t get the same negative trolls that are on Facebook.

    Who gets the most reviews?

    Some companies do a fantastic job of getting reviews and I certainly would not discourage them from stopping what they are doing so long as they are doing this in a professional and ethical way. We have done some research to see which companies across New Zealand get the most reviews. Here is our table of the top twenty Property Management companies who get the most reviews. A1 Property Managers in Christchurch get a staggering 283 reviews while we found 8 Property Management companies that got more than 100 reviews on Google.

    We have researched the top twenty companies who have obtained the most reviews. If you think you should be on this list let us know!

    Its just not cricket

    Like the Australian Cricket team, the temptation to tamper is too great for some. Fake reviews like ball tampering are simply not cricket!

    The recent stories will certainly make some people within our industry stop and think before they give a review to a fellow Property Management professional. I have likened this to the scandal that arose around the Australian Cricket Team after they tampered with the ball using sandpaper against South Africa. If you are not a cricket lover, this is a big no no! We all looked shocked and disgusted at what they did, but the reality is, they are probably not the first cricket team to tamper with the ball and cheat.

    The same can be said for the Te Aro branch of Quinovic who have gone too far. It was such a blatant breach that they were inevitability going to get caught especially after the recent bad publicity they have had. It was a case of desperation and whomever is responsible for these fake reviews should be marched out of the building and hopefully, out of our industry. Yet some of us would have at some stage, probably unknowingly and innocently reviewed someone as a favour to help them with their ratings.

    Now, I suspect that many individuals and companies will be looking at their reviews to ensure that they are all legitimate and honest. So my advice to you is this. If you have given a fake reviews or solicited them do what you can to remove them, because fake reviews are simply not cricket!

    Regards
    David Faulkner


    2018-image

    2018 The good the bad and the ugly

    • We review one of the most eventful years in property management history
    • 2018 will be remember for many reasons but not all is bad

    Where to start? I had the same problem this time last year when I did the same article. 2017 seems like a distant memory now as over the last 12 months, our industry has had everything thrown at it including a bucket of KFC!

    In my time working within the Property Management industry and in particular the rental sector, I cannot think of a time when we have had so much upheaval. Saying that it has been a challenge is an understatement. We have a lot to look at so let’s not waste any more time. As ever, we would love your feedback along with your high’s and low’s of the year.

    The good

    Professor Sir Peter Gluckman:On the 29th May a bombshell was dropped on all and we predicted that this would happen in our first article of 2018 when we stated in January that the ‘Meth Myth’ would finally be busted. And busted it was! The report by the now retired Professor Sir Peter Gluckman was comprehensive and condemning, stating that “There is currently no evidence that levels typically resulting from third-hand exposure to smoking residues on household surfaces can elicit an adverse health effect”. Sir Peter and his team was equally dismissive of the field composite test stating that they should not be used as it creates a bias towards detecting higher levels.

    I have long been a critic of many within the industry for using scaremongering tactics. The defence of the industry would be that we are trying to make the public aware of the implications. However, when your source of income is aligned with keeping the levels as low as possible, your opinion will naturally lead to a bias to keep the status quo and adopt the guidelines set by the standards committee in 2017. The sad thing is that thousands of people would have been affected and the health of some of the parties involved would have deteriorated probably due to financial burden and the emotional damage of having to deal with the fallout. Millions of dollars have been wasted, benefiting only the testers and the people who do the remediation work.

    The Meth testing industry has not yet to given up and is holding on to the Residential Tenancies Amendment Bill No 2 as a reason why testing should still take place. They even attempted to get a petition to get Parliament to commission an independent review of the Gluckman Report. This petition closed with only 526 signatures, probably made up of people who make money from testing and remediation.

    Tenancy Tribunal ended up in scratching there head as to what to do in the immediate fallout after the report. However, Tenancy Tribunal, who have to take some responsibility for creating this mess, have now adopted the Gluckman Report. To do otherwise would mean that HNZ, New Zealand’s biggest landlord would be committing multiple breaches of the RTA. In time, insurance companies must also follow suit and change their stance on not refusing to pay out unless a Meth test is carried out pre-tenancy. To maintain this stance is immoral and is in contradiction with the Gluckman report as Gluckman states the only testing that should be done is discrete individual swipes, the cost of which would be in excess of about $1200. Could you see all landlords doing that at the commencement of a tenancy?

    Unfortunately, across the ditch in Australia, we can see that they are heading down the same slippery slope with many in the industry using similar tactics that was used here. Yet the reality is, even after all this news and debate, no one can provide medical records that show an individual has got seriously sick or died from living in a property with low levels of meth. A waste of time, money and emotion. Sir Peter, you have done us all a massive favour. Now lets all please move on.

    Other mentions

    Dealing with the letting fee: This was always going to be passed on to the landlord as the industry finally took a cement pill, a deep breathe and wrote to their clients informing them that they would have to bear the cost. The fall out was minimal as many landlords understand that this is a service that comes at a cost. Someone had to pay.
    RTA Reform discussions: Being part of this was very very insightful and it showed that landlord and tenant groups could actually sit down and have a constructive discussion without abusing each other. A pleasant change to sit around a table and talk rather than abuse each other on Facebook. Balance is required with any reform.
    Pets: Good news all around if you are a pet loving tenant. It looks likely that tenants will have the right to have pets in their rental properties. I have no issue with this so long as amendments are made around tenant liability.

    The bad

    Attack on Negative Gearing: Everything the Coalition government is doing with rental properties, and it’s doing plenty, this has the potential to have the most negative consequences. Currently, if a rental property runs at a loss, the landlord can offset that loss against their own personal income and claim tax back. In the example below, the landlord earns $90,000 per annum in their paid employment and they also get income from a rental property that they own. The cost of operating the rental property including interest payments on the mortgage is just over $40,000 whilst the income from rent is only $28,600. This means the property is running at a loss of about $12,000. When you take the loss and add it to the annual salary, the landlords income drops to $78,157. This means that the landlord has paid too much tax by approximately $4,000. Today, you can claim this tax loss and get a refund on the tax you have paid.

    The Government looks like it is going to change this meaning that landlords will no longer be able to claim the tax loss.

    Labour have long held the opinion that the people who benefit from the practice of negative gearing are large scale speculators but the reality could not be further from the truth. This stance is going to really hurt many of the 80 to 90% of landlords who one no more than two properties.

    Just when we need landlords to invest in their properties to ensure that they are compliant with the Healthy Homes standards, we hammer them by removing the ability to offset losses against their own personal income. This again will lead to the selling of rental properties and driving up rents even further.
    A short sighted policy that will do more harm than good.

    Other mentions

    Special mention must go to Paul Davies of the Tenancy Compliance Investigation Team for his endearing ‘We are coming for you’ speech at the REINZ Conference. It is a long time since I felt like I was in trouble at school. Meanwhile Steve Watson, the General Manager of Tenancy Service gives the same message at the LPMA Conference but in a completely contrasting style showing empathy to the challenges Property Managers face. I know which approach I would rather work with.

    The alleged 100,000 uninsulated rental properties that are apparently still out there. The insulation industry has a capacity to do 50,000 a year according to one of the leading insulation providers. It seems inevitable that we are going to have a large amount of non-compliant properties by the time July 2019 comes around. Landlords have had plenty of time to get ready and I for one have no sympathy for those who do not comply.

    The ugly

    The Papakura Swamp House: This case highlighted how bad some of our rental properties are. The facts in story are that Dawn Robbie, her partner Cameron and their two young children have been living for the past 21 months in a rental house that floods underneath every time it rains. The problems were so bad that their 11 month baby ended up in intensive care with bronchiolitis.

    The landlord, Aven Raj, even issued the tenants a 90 day notice to vacate which was a clear breach of the Residential Tenancies Act under Retaliatory Notice. Fortunately common sense kicked in and it was withdrawn. The Ray White branch at Papatoetoe looked to have done a great job in resolving issues as they only took on the management after an insanitary notice was issued. This was brave of them as they could have potentially exposed themselves to unnecessary and unfair litigation. However, their pro-active approach helped both parties resolve the ongoing the issue.
    This story highlights the genuine health concerns that many tenants have to deal with. Thousands of tenants still live with in poor quality housing throughout the country and that whether we like it or not, the New Zealand rental stock still has its fair share of slumlords.

    These are the genuine health concerns of tenants in New Zealand. This is where the focus needs to lie and some of the Government policy rightly reflects this.

    Other mentions

    Media attack on the industry: You cannot blame journalists for doing their job and investigating stories but it has had a negative impact on the morale of many people working in the industry. I have spoken with people directly after some of them made the news for the wrong reasons and for one such person it was completely out of their control. She spent the weekend locked in her bedroom in tears to embarrassed to leave, devastated by the story that appeared, even though she had no control over the circumstances of the story.

    The issue is the damage it causes for individuals exposed under the media spotlight. Many are just doing their job to the best of their ability and all of a sudden they are making the headlines. I have seen Property Managers and business owners brought to tears after stories about them have been published. How can we attract and retain good quality people if they are subjected to such ordeals?

    The worst of these stories had to go to Rebecca Stevenson who’s article ‘Why Property Managers are terrible for everyone’ was appalling and had many inaccuracies. I don’t envisage Ms Stevenson will be winning any Pulitzer Prizes for this article.

    No cause evictions: I can see the logic in this but I suspect that this is again is going to cause far more issues than what it solves. A slow Tribunal process and a lack of supportive evidence could lead to all types of issues. Safety must be paramount in any decision around changes made and I fear that this may be glossed over.

     

     

    They said it! Quotes from the year in property management

    "There is currently no evidence that methamphetamine levels typically resulting from third-hand exposure to smoking residues on household surfaces can elicit an adverse health effect.
    — Professor Sir Peter Gluckman

    "I am satisfied that the Gluckman report justifies the adoption of a higher level where appropriate and as determined by the adjudicator on the facts of each case.
    — Principal Adjudicator Melissa Poole: Tribunal case 17th October 2018

    "At one point we had sewage spilling out by the back door. Not kidding – when we flushed the toilet it came out by the back steps because the pipe was blocked and broken.
    — Anonymous Tenant in the report about Property Management by Anglican Advocacy

    "I firmly believe property managers are s*#t, for both tenants and landlords
    — Rebecca Stevenson in her Spinoff Article about Property Managers

    “A lot of tenants ironically actually like the letting fee
    — Andrew King Head of NZPIF being interviewed on the AM Show

    "In another year let’s see if those rents have gone up Phil
    — Judith Collins with Phil Twyford on the AM Show talking about the letting fee ban

    "We make no apologies for our approach
    — Paul Davies, Senior Operations Advisor for MBIE commenting on their approach to targeting Property Managers with regards to compliance with insulation standards at the REINZ Conference

    "Legitimate reasons will be limited to non-payment of rent; serious illegal or anti-social behaviour; or significant damage to the property. No other reasons will be legitimate, including sale of the property, or the landlord’s family taking occupancy.
    — Renters Utd on reasons to end a tenancy in their plan to Fix Renting

    Enjoy the break!!

    If ever an industry deserved a break its ours. The year has been a challenging one with plenty of up’s and downs. It has been exhausting trying to keep abreast of all the changes that are coming and I have to confess, I don’t think I have looked forward to a break as much.

    As ever, we will do our best to keep you well informed in 2019 as the ever evolving world of Property Management and renting continues to spring surprises.

    In the meantime, switch off and take a break. Don’t answer the phone and don’t respond to emails (unless your working of course!!). Get off social media, it’s way too negative and make sure you spend time with your families and loved ones. We want to wish each and every one of you a Merry Christmas and a Happy New Year.

    Signing off for 2018

    David Faulkner


    phil-twyford

    Let it be: How to cope with the letting fee ban

    • We explore the best options for dealing with the Letting Fee Ban
    • Labour signal that there will be radical changes to the Residential Tenancies Act

    We have been warning you now for nearly two years that this was coming and now the day of reckoning is nearly upon us. The new Residential Tenancies (Prohibiting Letting Fees) Amendment Bill is now at the Select Committee stage with public submissions on the bill open until the 23rd May. Expect this to be law by Christmas with a further three months before the fee is banned completely.

    For all you people who are thinking of calling the letting fee something else or looking for an alternative fee to charge tenants, save your time and energy, that isn't going to work. The best thing we can do as an industry is to accept this, figure out if and how we can recover this and adapt to the situation.

    Make a submission to the Government

    We would recommend that you submit your opinion to the Government. It is our democratic right to do so and there is no point in whinging from the sidelines if you are not prepared to put pen to paper (or type on your keyboard) and make a submission. You have until midnight on the 23rd May to do so.

    History of the letting fee

    If we are being absolutely brutally honest, Labour is right to ban it. Is there anywhere else where a contract is signed between one party and another and a third party has to pay the fee? It is dated and goes back to the original act where only REINZ members and Real Estate Agents could charge the fee. This was pre-Real Estate Agents Act 2008. Property Management was left out of the REAA and in 2010 the new National Government amended the RTA allowing anyone acting as a letting agent or a solicitor the ability to charge a fee (see section 17 of the RTA).

    Where we, as an industry has failed, is to justify what the fee is actually for. How can a property rent in Ponsonby for $950 and a similar property rent for $300 in Levin yet the fee remains one week's rent?

    The reality is that it has been coming for some time and even if National had formed a Government in the last election, it was going to go at some stage when Labour eventually got in. This happened sooner than many anticipated so now we will just have to deal with the fallout. The chances of the next National lead Government reversing it are probably close to zero.

    What next? We explore the options

    Well, there are plenty of options open to the industry but unless you are prepared to wipe out on average about 15% of your total revenue, the landlord is going to have to pay it somehow or other. What this will mean is that where possible, there will be a further squeeze on rents as Property Management companies will try to increase rents where they can so their landlords are not out of pocket.

    It is a complex issue however after to talking to many companies across New Zealand both large and small, we think we have discussed almost every possible option there is. So, without further ado, we will look at what you can do to soften the impact of this blow.

    Option one: Sell your rent roll

    If you are a relatively small operator then I have no doubt that you would have considered this option as the prospect of approaching your owners for more money must be harrowing. Especially as many a small operator has used price as a point of difference as they have run the business out of their own property so to reduce overheads. If you have approximately 200 properties and your average fee is not great, you will be concerned.

    Originally, we predicted that the multipliers of rent rolls would decrease as supply would outweigh demand. However, this does not appear to be the case. Yes, activity has been quiet, particularly post-election as everyone has waited to see what will happen. However, we have all of a sudden become busy with people getting rent rolls appraised and our latest sale in provincial New Zealand went for a multiplier of 2.6 for every dollar in management fees.

    We have long held the belief that the natural evolution of the Property Management industry will see more properties managed by fewer companies. Most companies that we see are struggling to grow organically as the investors leave the market, leaving acquisition as the main source of business development. To put it simply, the big will get bigger as they gobble up the smaller companies. There will still be room for smaller companies but they have to charge accordingly. In January 2017, I predicted that cheap, boutique property management will simply disappear and nothing has changed my mind from that viewpoint.

    If you are genuinely worried about the future, now may be the time to man the lifeboats and head towards the escape route.

    Option two: Absorb it

    Obviously, this one would be most popular with the landlords. The option here is that you take a hit on your profit margin, try to trim some fat from your business and maybe implement a strong rent increase to try make more money out of the tenants.

    However, I struggle to see how anyone can do this. Even if they could, it would send a very negative message to your clients that you have been ripping them off for years.

    "15% cut in revenue? Don't worry about it, we'll wear it!" This would leave me thinking that I have been paying you too much for too long.

    The only companies I believe this is a realistic option for is for large offices who's overheads become a smaller proportion due to the size of their income or to good operators who are charging a high fee already. They may be able to absorb some of the cost but I firmly believe that these operators will be few and far between.

    Zenplace is a Property Management business in California that uses AI through Chatbots to improve productivity, communication and efficiency. They charge the landlord 50% of the first months rent and 4.9% ongoing.

    Others may take a serious look at the P&L and look at what fat they can cut out of their business as well as look at ways to make the business become more efficient and productive. This is where technology can help play its part. I have long argued that in the future we will see a new brand of automated Property Management evolve and this may speed up the process as Proptech companies continually introduce software that will improve efficiencies meaning Property Managers can manage more. We will also see a move to Artifical Intelligence as there are many tasks in Property Management which can be automated such as arrears and inspection notifications.

    Option three: Increase your management fee

    This to me, is probably the most obvious one to do for owners and Property Managers alike. We have sat down now with a number of companies and examined how much fees would have to increase by to ensure you recover the lost revenue.

    This table shows different ways of recovering the lost income through increasing fees and rent. We accept that some locations such as Christchurch may not be able to increase rents as there is an oversupply of property.

    If your letting fee makes up approximately 12% of your total revenue then a fee increase of about 1.3% should enable you to recover the cost. The obvious request of landlords will be that you increase your rents so our recommendation would be a combination of both were possible.

    However, some landlords with long-standing tenants may find this unfair. 'Why are you increasing my fee when my tenant has been living in the property for 7 years?' this is a fair call.  The decisions for companies is when do you implement this. Do you do it when the fee ban comes into effect or wait until there is a change of tenant?

    The other added benefit to companies who do increase their fee is that they are adding value to their business. Multipliers on rent rolls take into account contract fees such as the management fee and inspection fees. By increasing the management fee by 1% you could be increasing the capital value of your business by approximately 15%.

    Option four: Charge the landlord fee

    Probably the most obvious option will be to just charge the fee directly to the landlord. It is unlikely that owners in more expensive suburbs will be willing to accept a full weeks rent and what we may see evolve from this is an increase in Landlord paid advertising.

    If you are considering this as a way of recovering the fee, our recommendation will be to introduce a variety of marketing packages. Dependant on how the landlord wants to market the property, this will determine what fee they will be charged. If you are going to do this you also need to take into account the time and costs involved in letting the property.

    Promoted landlord paid advertising may become more prominent.

    One of the benefits of this option is that landlords may become more motivated to retain their tenants and we will see a greater spend on repairs and maintenance.

    This is something that should become more of a focus for our industry. One company that we work with do this remarkably well. There average spend on repairs and maintenance is higher than any company that we work with. Then we look at the average length of a tenancy. The correlation between maintenance spend and happy secure tenants is obvious. With this company, the average length of a tenancy is approximately three and a half years and the letting fee makes up less than 8% of total revenue. They run at an average occupancy rate in excess of 98% and there average arrears for the month is under 1%. This company has nothing to worry about.

    Option five: Ancillary fees

    The final option we will look at is to increase ancillary fees such as disbursements on maintenance and inspections. This is often an overlooked area where companies miss out on revenue.

    The maintenance fee is a prime example of companies missing out yet sometimes it is a fee that owners struggle with. Many owners will have the mindset that their Property Manager is getting maintenance done purely as a means of generating extra revenue. This, in my opinion, is untrue yet it is a perception many landlords may have and we cannot ignore what our consumer might think.

    Many companies spend extra time and money arranging maintenance and some will even end up doing Project Management without being paid for it. This is again an area of missed opportunity and we only have ourselves to blame. It again all comes down to landlord education and spending quality time at the start of the relationship explaining what is involved. Project Management is an entirely different skill set and service and goes way beyond 7% management fee.

    I am in no doubt that landlords whether they like it or not, are going to have to invest a considerable amount of money into their properties to ensure that they are compliant under the Healthy Homes Guarantee Bill. Companies can look at introducing a Project Management service or ensure that they are getting renumerated for the time they spend arranging repairs and maintenance.

    This table shows what you can potentially earn through organising repairs and maintenance. The average spend on maintenance is likely to increase as compliance with the Healthy Homes Guarantee Bill impacts landlords.

    Inspections is an other area where fees can be reviewed or introduced. You should be inspecting approximately 25% of your portfolio every month. By reviewing or even in some cases introducing an inspection fee you will be adding significant revenue that should go part of the way to compensate for this missed revenue in letting fees.

    Inspection revenue is an other area that could be looked at as a way of recouping the letting fee. Here the table shows what extra revenue can be earned by tweaking your inspection fee.

    Approach it sooner rather than later

    The fact that Property Management has been in the media spotlight so much in recent times means that landlords will already be conditioned to the fact that they will have to pay more. In our opinion, it would be wiser to approach them now to start the discussion. Present them with a number of options and see which one they prefer. No one likes being told what to do so engaging in dialogue with them to get their feedback will help enhance your relationship.

    I hold the belief that 90% of people are genuinely good to deal with and are understanding. Most landlords will realise that you are in business and you have to make a profit to survive. We may see some fallout as some landlords decide that they will do it themselves to save money. With all the legislation changes that they will have to deal with, good luck to them. They will need it!!

    Kiri Barfoot is interviewed on the AM Show discussing the letting fee

    Twyford admits that rents will increase

    In a recent interview with online media portal The Spinoff, Minister for Housing Phil Twyford accepts that rents will go up because of the letting fee ban. Twyford says the following.  "I know that if you ban letting fees those costs will be passed on and ultimately they’ll end up being added to rent to some extent, but the point about letting fees for tenants is that they come at the worst possible moment when you’re being expected to find bond and rent in advance and so on."

    This is after he has stated that there is no evidence to suggest rents will increase when this ban is introduced. Maybe he changed his tune after being in the same studio when Kiri Barfoot was being interviewed about the ban on the AM Show.

    Phil Twyford is the keynote speaker at this years REINZ Property Management Conference in August which is a great coup for REINZ. It will be fascinating to hear what he has to say and expect a full house to turn up and listen to him.

    The face of renting will change radically in New Zealand over the next 5 years. A lot of it is good but ultimately there will be a significant cost to all parties. As ever, here at Real iQ, we will keep you updated and give you our opinion.


    The Real-iQ recommendations for RTA reform

    • Is the average length of a tenancy 12 month? We don't think so!
    • We provide our solutions for pets, security of tenure and sorting out tribunal

    Back In February 2018, the much anticipated Housing Stocktake of New Zealand was published. This report which was commissioned by Housing Minister Phil Twyford back in November 2017 painted a sorry picture of the housing situation in New Zealand and in particular, for renters and low income earners. The report was written by Alan Johnson of the Salvation Army, Philippa Howden-Chapman of Rental Warrant of Fitness fame, and Generation Rent author Shamubeel Eaqub. The report is fascinating reading with many recommendations that we are now seeing in front of us through the Tenancy Reform Discussion document. Hopefully, you got a chance to make a submission.

    However, we have found one potential inaccuracy that leads to serious question marks as to what advice the Government is receiving.

    12 month tenancies the norm? We don’t think so!

    In this month’s article, we have decided to include the Real-iQ submission to the Government in regards to tenancy reforms and in this we question how they have come to the conclusion that most tenancies last 12 months. Please bear in mind that this submission is purely of the opinion of Real-iQ. Others mentioned in this article may not share all of our opinions. It would be great to get your feedback regarding our submission so please feel free to share your comments.

    Our submission to the RTA reform committee

    This is our response in regard to the Residential Tenancies Act Reform Document. We thank you for the opportunity to submit our views to the proposed reforms.

    As New Zealand’s most recognised Property Management training company, partnering with The Skills Organisation and REINZ, few are in a better position to give a balanced view on what needs to happen with regards to renting in New Zealand.

    We support many of the changes recommended in the reform document but there are other areas that are of concern and we wish to put forward our recommendations to help improve the experience of renting for tenants without penalising landlords unfairly.

    Information sourced from the Housing Stocktake of New Zealand

    In our opinion, landlords have been penalised enough recently following the Court of Appeal decision that stops tenants from being liable for accidental damage. This is hugely unfair. Even though this is being addressed in the Residential Tenancies Amendment Bill Number 2, it does not go far enough. We will touch on this later.

    Decisions based on incorrect data

    The Government is basing some of its decisions on incorrect data, in particular, the average length of a tenancy.

    In paragraph 6 of the RTA Reform documentation, it states that most tenancies in New Zealand are around 12 months. The reality is that this summary is woefully inaccurate. At Real iQ we get access to Property Management data from around New Zealand which will include close to 20,000 properties under management. Only in one case have we seen a rent roll with the average length of a tenancy close to 12 months. The vast majority of what we see is in excess of two years with the longest being three and a half years. On top of this, we have contacted some of the largest companies in New Zealand such as Barfoot and Thompson, Ray White, Crockers in Auckland and Oxygen in Wellington. Between them, they will manage in excess of 30,000 properties. Again, their data correlates with our findings.

    This graph from the Housing Stocktake of New Zealand shows the turnover of tenants is reducing and the report goes on to say the average length of a tenancy is over two years. Phil Twyford commissioned this report yet he insists that most tenancies last only 12 months.

    The Housing Stocktake of New Zealand is a report commissioned and signed off by Housing Minister Phil Twyford. The report was compiled by Shamubeel Eaqub, Philippa Howden-Chapman and Alan Johnson back in February 2018. A lot of the recommendations around tenancy reform have come directly from this report. Under paragraph 1.4, the findings of the authors are that the average length of a tenancy is in excess of 2 years. Again, this backs up our findings throughout the industry.

    One must question how and why the minister is stating that the average length of a tenancy is only 12 months. Therefore, we ask whether it is wise to make decisions when some of the data you are making the decision on is clearly flawed and inaccurate?

    Removing ‘No Cause’ terminations from periodic agreements

    This is a decision that we have thought long and hard about. Yes, some landlords do exploit this and if landlords do end a tenancy as a Retaliatory Notice (see section 54 of the RTA) then they should face sanction.

    However, the reality is that the vast majority of tenancies end because a tenant gives notice, not the other way around.

    What the reforms do not take into account is the safety and wellbeing of landlords, neighbours and in particular, Property Managers. Every year we survey the industry and put forward the question ‘Have you ever felt that your safety has been compromised as a Property Manager’?The majority of Property Managers have said yes, in particular, female Property Managers.

    The job of a Property Manager can be at times risky and dangerous. You deal with conflict on a regular basis and property seems to bring the worst out of people. The risks of the role were so tragically highlighted last year when two Property Managers were shot dead in Northland.

    The question we have around having to give a valid reason to end a tenancy is this. If we have to go to Tribunal to end a tenancy, how do you prove that your Property Manager felt at risk? We teach Property Managers to listen to their instincts and if they do not feel safe, do not enter. On a small amount of occasions in my previous role managing a large Property Management team, I would give 90 days’ notice to a tenant due to the fact that the Property Manager, almost always female, felt at risk entering the property. Seldom will the Police get involved as they look at these situations as civil matters. Therefore, obtaining evidence will become difficult.

    Selling the rental property

    Other concerns we have is around the landlord not being able to give notice to a tenant to sell a house vacant. This is hugely unfair on a landlord and I have seen numerous occasions where tenants have deliberately tried to sabotage sales due to the fact that they do not want to leave their tenancy. This can cost a landlord thousands upon thousands of dollars as tenants leave the property messy but not so bad that warrants a breach. We understand that the rental property is the tenants’ home. However, the property is owned by the landlord and they should have the ability to end a tenancy to sell a house vacant.

    We see no issue with removing 42 days’ notice and extending this to 90 days’, but we feel that tenants notice period should extend from 21 days to 28 days. This will give a landlord more time to advertise their property to reduce the vacancy period.

    Therefore, after careful consideration, we simply cannot support the removal of ‘no cause’ evictions. The decision is based mainly on the grounds of health and safety and the wellbeing of Property Managers up and down New Zealand. We wish for the status quo to remain for both periodic and fixed term tenancies. We do however, have an alternative recommendation in terms of penalising landlords who use ‘no cause’ evictions unlawfully.

    Alternative action instead

    What has always been apparent is that there is a simple lack of knowledge of rights and responsibilities. This is not just for tenants but also for landlords and disturbingly, many Property Managers as well.

    Tenants already have a multitude of rights, the issue is, they do not know this, or they simply cannot be bothered challenging landlords. As such, we have an alternative suggestion to help protect tenants from being subjected to unfair evictions.

    Increase exemplary damages for unlawful acts to a percentage of the annual rent income rather than a dollar amount and strengthen the penalties that can be awarded against landlords and tenants.

    Example; currently the maximum amount of exemplary damages for section 54, (Retaliatory Notice) of the RTA is $4,000. It would be a far greater disincentive to make this far higher. For example, expand this to a maximum of 50% of the annual rental income. If a property rented at $450 per week then the annual rent would be $23,400. 50% of this means the maximum exemplary damages award for a Retaliatory Notice is $11,700.

    Under section 13A of the RTA (Content of a Tenancy Agreement) include that a statement must be on the Tenancy Agreement notifying tenants that if they feel that they have been given unfair notice, they have the right to appeal this under section 54 of the Residential Tenancies Act. As 42-day notice periods are likely to be removed then we can extend the amount of time a tenant can apply to Tenancy Tribunal to 35 working days to give them more time.

    Different Types of Tenancy

    One of the recommendations the report makes is to remove the fixed term tenancy. I do see some logic in this reasoning. Fixed term tenancies can cause issues for tenants and landlords alike. However, they are particularly useful in regard to student flatting situations and gives tenants the assurance that their property cannot be sold from underneath them and it gives landlords assurance that they have tenants for the student year.

    However, as the main theory around removing fixed term tenancies was due to the fact that periodic tenancies would convert to fixed term to avoid ‘no cause evictions’ then there is no point to change if the status quo remains. If a tenant is paying their rent on time and looking after the property, then there is no reason to not renew a tenancy.

    Rent Increases

    One recommendation that we do have is that a landlord can only do a rent increase at the renewal date of the tenancy and not half way through a fixed term.

    Rarely have we seen rent increases every six months. The vast majority will offer a rent increase on an annual basis. We also have no issue with banning rent bidding.

    Review Osaki ruling and we agree with Pets

    This is one recommendation that we do agree with. Tenants should have the right to own a pet as they can play a major role in the emotional and mental wellbeing of tenants. It is not fair that a family in an owner-occupied property can have a dog, but tenants next door cannot without the landlord’s permission.

    However, there has to be changes to the RTA to protect owners and this is where the current proposed changes in the RTA Amendment Bill Number 2 do not go far enough. Whether we like it or not, pets can and will damage rental properties. It is unfair to expect any landlord to have to pay money to rectify accidental damage caused by a pet however this will be the case under the current proposed changes in the RTA Amendment Bill Number 2. Under the proposed section 49B(3) When tenant liable it states that the tenant can only be liable for up to four weeks rent or excess of insurance, but not for each event.

    The infamous Osaki case is finally being dealt with in the Residential Tenancies Reform Bill Number 2. We argue, it doesn’t go far enough with landlords unable to claim multiple insurances excesses for multiple insurance claims. This needs to change if tenants have the right to own pets

    Often, insurers will look at multiple damages by a tenant as individual claims, so the landlord will have to pay multiple excesses. The tenant is only liable for up to four weeks rent. This again is unfair.

    If the RTA Amendment Bill Number 2 is altered to ensure that tenants are liable for the excess on each insurance claim made by a landlord, then we will gladly support the allowance of pets.

    In terms of pets, we suggest a new section of the RTA being introduced.

    Section 41A Tenant’s responsibility for actions of pets.

    In this, we propose the following.

    On request by the tenant the landlord cannot unreasonably deny a request by a tenant to allow a pet.

    Any pets allowed at the property must comply with local and statutory laws such as the Dog Control Act 1996. If the pet is a dog, then it must be registered with the local council.

    The landlord can put limitations around the number of pets at the property (similar to occupants)

    At conclusion of the tenancy, the tenant agrees to have the carpets commercially clean and treated for pests such as fleas.

    Body corporate rules supersede any rights that a tenant may have in regard to pets.

    Modifications

    We agree that tenants should be allowed to make minor modifications to a rental property. Tenants will not be able to make structural changes to the property, this would be in breach of the Building Act and any local council by laws. Likewise, with electrical or plumbing work. Tenants should be allowed to hang picture hooks, put up shelving and other minor alterations.

    The only concern we have around this is in regard to painting walls. Landlords should have the right to ensure that any painting is carried out to a professional standard and should have the right to say no if they have concerns around the tenant’s ability to carry out the work.

    At the conclusion of the tenancy the tenant and landlord can decide to have the property restored at the tenants expense or leave the property as is.

    Boarding Houses

    We strongly approve of a Warrant of Fitness being introduced for boarding houses and their operators. The recommendations in the report should be implemented. New Zealand’s most vulnerable citizens often live in boarding houses and they need to be protected. Landlords in breach of standards set around a Warrant of Fitness should find their licence to operate suspended or have work orders enforced on them to make them compliant.

    With an increase in short term rentals on a room by room basis, in particular around Central Otago, we believe that any property being operated under this manner with a tenancy that is greater than 28 days should come under sections Part 2A Boarding house tenancies.

    RealiQ recommendation for exemplary damages

    This is what we believe exemplary damages should look like. We also believe that there should be additional exemplary damages for intentional damage of a property, whether it be caused by the tenant, a guest of the tenant or a pet.

    Enforcement of Tenancy Law

    As stated earlier, we believe that enforcement needs to be looked at and in particular, how Tenancy Tribunal operates.

    First, we will deal with exemplary damages. The current exemplary damages do not go far enough both for tenants and for landlords. We propose that the penalties should be greater and reflect the annual rent collected.

    Example: Breach of section 45.1A Landlords Responsibilities is currently $4,000. This is a serious breach and should be extended to on serious cases such as the ‘Papakura swamp house’ a maximum penalty of 50% of the annual rent with a maximum ceiling of $50,000.

    Likewise, the current penalties tenants may face do not go far enough. Tenants do not face exemplary damages for intentionally damaging a property. If I deliberately smashed someone’s car, I would face criminal charges. However, a tenant can deliberately damage a landlord’s property and only be charged the cost of repair and remediation.

    This brings us to our final recommendation.

    Automate Tribunal Orders for rent arrears only applications

    Tenancy Tribunal is slow. With these reforms we predict that we will see more tenants exercising their rights (something we approve) and extending the amount of time it will take to get a hearing. Yet currently, of the 15,000 annual Tribunal hearings, roughly 68% of the hearings are for situations where the tenant is in arrears.

    The Tenancy Tribunal role is to make rulings on disputes, however quite often, when a landlord makes an application solely for rent arrears, there are no disputes. What we propose is as follows.

    The landlord can apply for termination on the grounds of rent arrears under either section 56 or 55 of the RTA.

    When a tenant becomes 21 days or more in arrears then section 55 of the RTA applies (Termination for non-payment of rent, damage or assault).

    The landlord should then send evidence to Tenancy Services proving that the tenant is 21 days or more in arrears.

    If the application is solely for rent arrears then the adjudicator must provide a possession order of tenancy to the landlord giving possession to the landlord in five working days.

    The tenants will be notified of the possession order. The time between possession being granted to the landlord will give the tenant time to apply for a rehearing under section 105 of the RTA. If the tenant has evidence that they have paid then a rehearing will be granted within 10 working days of the possession order being granted.

    We believe that this will have the ability to half the Tenancy Tribunal wait time and lead to faster and fairer dispute resolution.

    We believe following this process could half the wait time for a Tribunal hearing. Approximately 10,000 cases involving rent arrears are heard every year in Tribunal. On many occasions the tenant will not even turn up.

    We agree that Tenancy Services and Tenancy Compliance Investigation Team (TCIT) should have powers to audit landlords and Property Management companies for compliance and have the powers to enter Boarding Houses. We also believe that TCIT should have the ability to issue all three options suggested under Enabling effective and efficient enforcement action.


    new-zealand-parliament

    Fixed on change. Why tenancy reform will benefit New Zealand

    • Radical changes proposed to Residential tenancies Act will provide more tools to property managers
    • Security of tenure may spell the end to the fixed term tenancy

    Almost twelve months on from the formation of the Government, the changes around tenancy reform in New Zealand are coming thick and fast. Make no mistake, radical change is coming and particularly around the security of tenure and protecting tenants. A case I dealt with recently highlights why tenants need more security.

    I received a call from a Property Manager last week asking for some guidance. The situation arose after a tenant was given 90 days notice to end the tenancy.

    This is a scenario that many Property Managers, including myself, have found themselves in and many of you reading this will probably be able to relate to this story.

    The Property Manager explained to me that a tenant of a particular property was demanding and very ‘nit picky’ when it came to requesting maintenance. However, although this tenant could be demanding, he looked after the property and always paid his rent on time. The landlord who had six properties with this company could sometimes drag his feet in getting things fixed and responding to requests. After a number of requests for a variety of minor maintenance issues, the landlord had simply had enough.

    “Give the tenant 90 days notice” was the instruction that came across. “OK” said the Property Manager. The Property Manager then notified the tenant who asked why he had been given notice. The Property Manager in this case correctly stated that they do not have to give a reason but she would ask the landlord.

    The landlord responds “Tell him my sister will be moving in after Christmas”. “OK” responded the Property Manager.

    After notifying the tenant, the tenant subsequently gives the landlord 21 days notice to vacate the tenancy and move out.

    Then the landlord responds to the Property Manager. “Right, can you advertise for new tenants please?”

    “Hang on! You just told me your sister was moving in.”

    “Yes, things have changed and she may no longer need it”

    What is the Property Manager to do? Tell the landlord no we can’t and risk losing 6 managements with an annual contract value of approximately $10,000? Or do you risk it and re-advertise the property and hope the tenant does not go after you for Retaliatory Notice? If found guilty this could leave the company exposed to exemplary damages of up to $4,000.

    This is not an isolated occurrence and as more and more tenants start to find their voice and speak up for their rights, more and more landlords may leave themselves and their Property Managers at risk because they make bad, ill informed decisions based on a lack of knowledge and emotion.

    Laws need to evolve and landlords have to accept it.

    In New Zealand, our rental laws have just become outdated and we are finally catching up with the rest of the world. The reality is that there are plenty of landlords out there who abuse their power and hide behind the Property Manager expecting them to take the fall whilst they have no care of responsibility. This was highlighted in a recent Consumer report that highlighted Property Managers were much slower in getting maintenance organised compared with the landlords who self managed. This is not because Property Managers don’t care, it is because it is much easier for a landlord to say ‘no’ or ignore the request altogether when you have a Property Manager as a go between. When you have to deal face to face with the tenant, its a lot harder to say no.

    Have your say on proposed reforms to the RTA

    I liken being a landlord to being a parent. No one admits to being a bad one but unfortunately in New Zealand, there are plenty of them. Whether through intent or pure ignorance of their responsibilities, many landlords get it wrong. Yes, the vast majority are good and try to do the right thing, but, like Property Managers, they can be let down by a small minority. Tenancy laws are not robust enough to deal with modern day renting and as about a third of New Zealanders now rent with many caught in the rental cycle for life, the Residential Tenancies Act has to evolve. Tenants need to be protected and looked after.

    Tenants were given 90 days notice after this property hit the headlines for all the wrong reasons. The tenants rightly challenged this. No cause evictions will soon become a thing of the past. Good riddance I say.

    As our Government approaches its first year anniversary, announcements of tenancy reforms are happening more and more as Phil Twyford’s masterplan starts to take shape. Between now and Christmas, we are going the see the following.

    • Proposed reforms to the Residential Tenancies Act announced in particular around the ‘security of tenure’, rent bidding and allowing tenants to have pets.
    • Stricter rules and regulations for operators of Boarding Houses with likely introduction of a Warrant of Fitness.
    • Standards and timeframe around the implementation of the Healthy Homes Guarantee Bill criteria.
    • Residential Tenancies Amendment Bill No.2 and Abolishment of Letting Fee Bill will become law.
    • And yes, the elephant in the room, there will be some announcement as to whether our industry will become regulated.

    The Fixed Term Tenancy may go

    The removal of ‘No Cause’ notice on periodic tenancies where the landlord can give the tenant 90 days notice without reason is the right thing to do. Yes, you will get the odd occasion where tenants who are a nuisance to society with anti-social behaviour may abuse the situation if it is not managed properly. However, situations like this will be rare and overall, this change will be to the betterment of New Zealand and it is long overdue.

    The proposed reforms will scrap the 42 day notice period for family members moving into the property or vacant possession when the property sells. All notice periods to end a periodic tenancy will extended to 90 days under normal circumstances. More importantly, the landlord will also have to provide a valid reason to end the tenancy. Not liking a particular tenant isn’t a valid reason.

    A potential victim of the removal of ‘No Cause’ 90 day notice is the Fixed-Term tenancy. The government have certainly done their homework around this, correctly identifying that if you have to give a valid reason to end a periodic tenancy, landlords will simply switch to Fixed-Term tenancies. With no reason required not to offer a renewal, the landlord retains control and the tenant may have to leave without good reason. As such three options have been proposed

    • Providing tenants with a right to extend their fixed-term agreement

    This provides tenants with a right to extend or renew their agreement or allow tenants to move onto a periodic agreement provided that the tenant has not breached their obligations during the tenancy.

    • Specify a minimum length for a fixed-term agreement

    This seems less practicable. There will be lots of situations where a landlord may want to rent his or her property out for a short period of time. Stating the minimum period may be too restrictive.

    • Remove fixed term tenancies altogether

    This is the final option that has been muted as a way of dealing with the security of tenure and therefore, we will only see periodic tenancies. Landlords with properties catering for the student market around Universities will shudder at the thought of this suggestion. A tenant giving notice in July, half way through the student year could be disastrous with no rental income for six months being a real possibility.

    The other unforeseen consequence of this is where a family has a holiday home. In many of the holiday hotspots, landlords offer fixed term ending around Christmas time so they can occupy the property for their Christmas holiday. This is common in places such as Wanaka. Requiring the property to have a ‘holiday’ is not a valid reason for giving tenants notice. It will be interesting to see the impact of the changes in markets such as this.

    Looking across the ditch to Victoria, new rental laws have recently been passed which are very similar to what is being proposed in New Zealand. For Fixed term tenancies, landlords will only be able to end tenancies using an ‘end of fixed term’ notice to vacate at the end of a tenant’s first fixed term agreement. At the end of any subsequent fixed terms for that same tenant, the landlord will only be able to end the tenancy using one of the grounds specified in the state Residential Tenancies Act.

    This reform aims to improve rental security and encourage longer term leasing arrangements between the parties, especially where a tenant has proven they can meet their obligations.

    Tenants who receive an ‘end of fixed term’ notice will also be able to give 14 days’ notice to vacate the property at any time, rather than having to pay rent until the end of the fixed term. This will stop tenants missing out on new homes because they have to wait until the end of the fixed term, or paying double rent when they find a new home.

    The household pet has been a victim of the housing crisis as many families have been forced to give up dogs. The new proposal is fair and reasonable as the problems arise from the tenants rather than the dog.

    Who let the dogs out?

    A long standing victim of the housing crisis isn’t just people, it’s pets. In fact, over three years ago, I wrote an article about the plight of families with pets looking for rental properties called ‘Gone to the Dogs’. From my own experience as a Property Manager, rarely did I have an issue in dealing with pet loving tenants. In fact on the contrary, I found pet loving tenants to be an absolute pleasure to deal with. So long as tenants provide evidence around registration of their dog, then having pets in rental properties should be a right of the tenant and not the landlord. A two year old child is just as likely to cause damage to a rental property, just leave them a set of crayons!

    What we would recommend though is that landlords have the ability to ensure that carpets are commercially cleaned at the end of a tenancy along with treatment for fleas.

    Why do we go to Tribunal for arrears?

    A flow on affect from tenants feeling more secure could be an increase in tenants exercising their rights through the Tenancy Tribunal as there would be no fear of retribution. This would see a likely increase in Tenancy Tribunal hearings and longer wait time before you get a hearing. Tribunal has to operate quickly and fairly. Having unnecessary delays is unfair on both landlords and tenants. If there is a dispute and genuine concern about ongoing damage to a property then the landlord should be able to access tribunal quickly and vice versa for tenants.

    One solution we have thought of is to remove rent arrears only applications from being heard in the Tenancy Tribunal.

    This is the one area of renting which is straight forward and if a tenant is in arrears it is not a dispute. It is fact.

    In 2017, there were just under 10,000 Tribunal hearings for rent arrears. This equated to approximately 65% of all Tribunal hearings.

    In 2017, there were just under 10,000 Tribunal hearings for rent arrears. This equated to approximately 65% of all Tribunal hearings.

    If the landlord or Property Manager can provide evidence that a tenant is more than 21 days in arrears and it is not in dispute then why should you have to go to Tenancy Tribunal to get a possession order? So long as there is no cross application then there is no dispute and possession should be granted without wasting the time of everyone involved.

    Just think about the time that would be saved in Tenancy Tribunal.

    • Approximately 15,000 Tenancy Tribunal hearings take place every year
    • According to the reform discussion document, 90% of cases are lodged by landlords of which 75% are for rent arrears.
    • If the document is accurate this means that approximately 10,000 tribunal hearings will be for rent arrears.

    Imagine the time saving if arrears disputes could be handled remotely without having to go to Tribunal. Once a tenant becomes say 21 days in arrears and evidence is provided then a possession order could be written up, sealed and the tenant would have to vacate the property within 7 days unless payment of the arrears is made.

    In the UK, most tenancy disputes don’t even have a hearing. Parties submit evidence and a ruling is based purely on this. In today’s modern age with technology becoming so prevalent, it seems a complete waste of time and money to have to wait for a Tribunal hearing that in most cases the tenant does not even turn up for.

    Other factors to discuss

    The reforms are far and wide reaching. covering them all in this article would be akin to writing a book. Other factors that are in the document are as follows.

    • Outlawing rent bidding and reducing rent increases to once a year
    • Improving accountability for operators of boarding houses
    • Reviewing exemplary damages and assessing whether they go far enough
    • Look at the powers of MBIE to investigate severe alleged breaches of the RTA

    Whatever comes of these changes, there is no doubt that tenant groups will become more confident about the future of renting with more power moving towards the tenant. Overall, as an industry I do not believe we have anything to fear - in fact I believe the reforms will make our job easier. Yes, there will be concerns around what happens with Fixed-Term tenancies but I have not seen anything in this document that I feel strongly opposed to. If anything, I do believe the changes will give more power to Property Managers as they will have more tools at their disposal in dealing with difficult clients whether they be landlords or tenants.

    The concept of being a tenant has changed. It is no longer a temporary solution before you get your first house. For many, they do not have that luxury. I for one support many of the changes proposed.

    Next thing to cover will be the standards around the Healthy Homes Guarantee Bill and regulation of our industry. Change is constant in business and in life and sometimes the amount of change we are dealing with can feel somewhat overwhelming. Rather than fight the inevitable, my belief is that we should embrace change and the companies that do this will thrive. In the case of tenancy law, it is change that needs to happen and long term, the nation will be better off for it.


    Church preachers 'game changer' as calls for regulation intensify

    • Property institute claim to be 'game changers' for property management
    • We believe that governance through the REA is the only logical solution

    Never before has our industry come under such intense scrutiny as it has right now. Whether it be tenant groups, politicians, the media or the oppressive Tenancy Compliance and Investigation Team, everyone wants to attack Property Managers. In fairness, we seem to be giving them plenty of ammunition and the latest faux pas by a Wellington-based Property Management company was embarrassingly distasteful. One wonders what they must have been thinking.

    With all the negative publicity and an increasingly vocal call from all parties to regulate our industry, it is now a case of when the regulation of our industry will happen rather than if.

    The focus should now turn to what regulation will look like and, as an industry, we seem to be heading in two different directions.

    The main discussion is whether Property Management will self-regulate as has been suggested by some influential figures within the property sector, or whether the Government should become the regulator. If you read between the lines and listen to what Housing Minister Phil Twyford says, it appears that the Government do not have regulation high on the agenda.  The amount of bad publicity and calls from all sectors, especially renting groups who are traditionally Labour supporters, will likely have the Government re-evaluating their position.

    We are starting to see two very different opinions coming through from two different organisations.

    VOTE NOW: Should we be regulated and if so how?

    Firstly we look at the smaller but well supported Independent Property Management Association (IPMA). They appear to be very much in the self-regulation camp after aligning themselves with the Property Institute of New Zealand (PINZ). Ashley Church, CEO of PINZ announced their partnership under much fanfare back in July claiming it to be a 'Game Changer' for the Property Management industry. Time will tell if this will be the case.

    REINZ CEO Bindi Norwell with Housing Minister Phil Twyford at the recent REINZ Conference in Auckland

    The opinion we favour and has been voiced by REINZ is the case for regulation under the REA. In our opinion, this is the only logical answer to help solve the issues that have consistently plagued our industry and will provide greater assurances for both tenants and landlords alike.

    We fear that Twyford may take the soft option and seek the industry to self-regulate as the Government may not want to create more work for themselves. This will be the likely middle ground that will leave the Government claiming that they took steps without actually taking any responsibility.

    How did we get here?

    The problems started over a decade ago when the then Associate Justice Minister Clayton Cosgrove introduced a bill that stripped REINZ of its then self-regulating powers and we saw the birth of the Real Estate Agents Authority (now known as the REA). Before the evolution of the REA, to work as a Property Manager leasing property, you had to have your salesperson certificate. As the axe fell on self-regulation and the REA was introduced, it was decided that Property Management should be left out. I remember this time well as around 2010 I was invited to participate in the REINZ Property Management Sector Group. At the time it was discussed that most of the complaints REINZ received were about Property Managers and it was decided that the REA would not have the resources to deal with so many complaints. Therefore, it was decided that Property Management would be left out, meaning anyone could become a Property Manager without any qualification.

    The new elected National Government amendments to the Residential Tenancies Act in 2010 escalated the issue, thus allowing anybody operating as a property manager the ability to charge letting fees. Previously only REINZ members were able to do this. This opened the floodgates as new Property Management companies started everywhere, leading to the situation that we have now. A proliferation of small unqualified Property Management companies governed by no one has led to a drop in standards.

    Deregulation of our industry has failed.

    Game changer claims

    It seems that after ten years, we have come full circle and the status quo cannot remain. The question is what will Twyford do next?

    We know that Minister Twyford has met with IPMA and with Ashley Church of PINZ and if I was a betting man, I would predict that Twyford will take the IPMA and PINZ preferred position of self-regulation, governed by PINZ.

    Ashley Church of the Property Institute claims that their relationship with IPMA is a 'game changer' for the Property Management industry. Time will tell if he is correct.

    If PINZ and IPMA get their way we will be looking at PINZ to set the standards on what best practice will look like and one would suspect they would have their own in-house disciplinary procedures for rogue Property Managers.

    Ashley Church has two years to prove to the current Government that they have what it takes. PINZ are predicting many more Property Management companies will switch to IPMA as part of their new initiative and IPMA chair Karen Withers makes the bold claim that their members already represent the pinnacle of the Property Management industry.

    One must applaud such an initiative. It adds greater credibility to IPMA and will give them more profile. As such, they can start to influence Government policy and in particular around the Residential Tenancies Act.

    But does this mean that we will all become members of IPMA and will PINZ be telling us how to run our industry?

    Self regulation flawed

    In principle, any suggestion of self-regulation is better than the current situation however on a second look at the idea, I do have serious concerns about the practicality of such a plan.

    For this idea to have any merit we will need to see the big players switch from REINZ to IPMA and this is highly unlikely. Under the current IPMA constitution, REINZ members cannot take up IPMA membership. Can you imagine the likes of Barfoot and Thompson walking away from REINZ to become a member of IPMA? Me neither!

    If IPMA get their way, REINZ will set their own criteria, they partly have already with their Accreditation programme. This would split the industry in two.

    It also goes against what Labour stood for 10 years ago when Clayton Cosgrove opposed the self-regulating powers of REINZ - so why should Property Management be any different and can you guarantee that PINZ will run it differently or any better than the way REINZ ran the industry 10 years ago?

    My main concern is this will become too confusing for the consumer. Whether we like it or not, there will be multiple times where issues cross the boundary between residential sales and property management and as such having to go to two separate bodies to raise issues will not be practical.

    As an example. A house is managed by ABC Property Managers and the landlord decides to sell with Anne Agent Real Estate. The house is sold but there is confusion around possession date and subsequently, incorrect notice is given to the tenants meaning the purchaser cannot move in on the date they settle. Both ABC Property Management and Anne Agent Real Estate blame each other for the mistake. The delay costs thousands as well as the emotional distress it causes the purchaser, the vendor and the tenants. The purchaser decides to log a formal complaint.

    • Who do they complain to - REA, PINZ or both?
    • What happens if different regulators come up with different conclusions?
    • What happens if both regulators end up blaming the other party?
    • Does the purchaser have to fill out two separate complaint forms?
    • Are there different appeal processes?

    Whether you like it or not, there is simply too much crossover between residential sales and property management. Although there is clearly a difference in the service that both sales and property management offer, ultimately, they are dealing with the same product, real estate. Therefore, keeping it regulated under one roof is the only logical answer. Having it any other way is too confusing and can lead to inconsistencies.

    In this diagram, we try to show the different parties that can be involved in a transaction involving the sale of an investment property. It simply makes sense for the REA to be the regulator, keeping the process simple for consumers. Tenants would continue to deal directly with Tenancy Tribunal and not the REA yet if a landlord has an issue with their property manager, they can complain directly to REA.

    REA the only way forward

    When you look at what the REA covers it seems ludicrous that Property Management is left out. Leasing of commercial real estate is a prime example. To do commercial leasing you have to operate under the boundaries of the REA - yet leasing a residential property is deemed not to come under REA. For companies that run real estate in conjunction with property management, this can unfairly expose them to risk.

    I have thought about how regulation would look for some time now and back in February of 2015 when I first started consulting I wrote an article proposing how regulation should look. Not a lot has changed in my opinion.

    Read article on regulation written February 2015

    What I proposed for property management is as follows.

    • Compulsory qualifications for Property Managers: Do we financially benefit from this as a company? Yes, of course we do, but can anyone seriously argue that being qualified as a Property Manager does not benefit the individual, the company they work for and their consumers whether they be tenants or landlords? I truly believe that knowledge is power and lack of knowledge of the Residential Tenancies Act within our industry always astounds me. Since delivering the New Zealand Residential Property Management Level 4 qualification we have seen a nearly 80% increase in uptake since the previous year. We expect to get very busy in the next twelve months.
    • Compulsory verified and non-verified training: Replicate what happens in real estate. Our industry is constantly dealing with change whether it be through legislation, technology or consumer demands. 10 hours on verified and non-verified training has helped real estate. It will also benefit property management.
    • Mandatory Trust Accounting: Professional Property Management is about trust and transparency. The money collected does not belong to a Property Management company, it belongs to the client who will give a small percentage to the company for managing their asset. Yet too few companies actually use a trust account. Money that does not belong to the company can easily be used for business expenses and it is way too easy to deceive your consumer.
    • Compulsory Auditing of Trust Accounts: Under section 125 of the Real Estate Agents Act 2008 the agent's trust accounts must be audited and the REA has the power to appoint an auditor to audit accounts at any time. When you think of the millions of dollars that are held in an account over a twelve month period, being audited is an absolute necessity.
    • Criminal record checks on employees:Again this is about establishing trust with the consumers. Property Managers will enter 100's of houses throughout the year. They will do approximately 500 inspections a year and will be potentially managing millions of dollars of landlords income and tenant bonds. You want to know the person doing this has no unpleasant history.
    • Extend the powers of the REA:Put Property Management under this as well. There has to be some discussion as to what authority they have and what constitutes a worthwhile complaint. You cannot have the authority bogged down with small complaints. This was the original issue back in 2008. Landlords would get upset because their expectations around what constitutes reasonably clean may not have been met. Let the REA deal with cases where the claims are for a significant dollar amount. There will have to be clear boundaries put in place for this. Also, give the REA powers so they can penalise companies or individuals or even ban them from operating.
    • Transparent complaints procedure: Every property management company should issue landlords a copy of their complaints procedure and tenants should also be given booklets on what to do if they have an issue that cannot be resolved. The reality is only a handful of property management companies actually have a transparent complaints procedure and many have no procedure at all.
    • Tenant charges clearly displayed: This is a step we have taken from the UK. If tenants break a contract they should be charged for the re-letting of that property. However, to avoid confusion and disputes, those fees should be clearly outlined along with how they are calculated before any tenant signs the Tenancy Agreement. Again, this helps establish transparency and trust.
    • Compulsory training for private landlords:  This is a new suggestion. If you are a landlord you are in business and it can no longer be treated as a hobby. As letting fees being charged to tenants are banned and the responsibility for fees is with the owner, we may see more landlords choose to manage the property themselves. This will cause potential issues as many landlords may have great intentions but do not have the skill set or knowledge to manage a residential tenancy.

    The argument put forward by many of the people who oppose regulation under REA is that property management will just become a second-class citizen to residential sales. 10 years ago, I would have agreed, however, I firmly believe that opinion is changing. The true value of any real estate business is in the rent roll, not in the sales. Rather than property management being poor cousins, I see us as the rich uncle or auntie who looks after the family silver. We also have a changing generation as the baby boomers sell up and retire, a new breed of business owner is emerging. They understand the value of a high performing property management business and the companies that thrive will focus on property management first, not the other way round.

    Many people may think I take such a stance because of our association with REINZ. That is not the case, however, I do take umbrage when individuals make comments suggesting our stance is commercially motivated. Nothing could be further from the truth. Every decision we make as a company has the industry's well being at heart. It actually makes commercial sense for us to keep quiet. However, I once received some great advice when I was on the REINZ committee from the brilliant Hayley Stevenson of Housesmart in Queenstown. "You can sit on the sideline and whine or you can get on the playing field and speak up for what you believe". I choose to do the latter.

    Our industry has taken an absolute hammering over recent times. Yet in spite of this, I remain optimistic that good will come out of all the bad publicity that has been associated with Property Management. There is now a strong sense that change is coming. One hopes that the Government listens to all parties and think their decisions through very very carefully. The next few months are critical for our industry and we cannot afford to get it wrong.


    An open letter to the property management industry

    Real-iQ’s vision for the Property Management Industry

    During Christmas of 2015, after surviving my first year in business, I sat down and wrote down a plan as to how I saw the future of Property Management and what type of role I wanted to play in the industry. It was at this point I decided to develop a Training Business to support Property Managers throughout the country.  I simply wanted to make a positive impact on the industry that had given me so much pleasure and satisfaction. I had seen too many Property Managers in offices up and down the country struggle with a lack of resources, training and support. I truly believed that I could make a difference.

    Real-iQ has come a long way in our relative short history.  I started off as a sole operator and now we are a small and dedicated team whom I am grateful to work with and who share my vision.

    Recently, it was announced the REINZ, Real-iQ and The Skills Organisation were partnering to bring the Property Management industry the revamped New Zealand Residential Property Management Level 4 qualification. I have read some comments on social media sites, including our own which disapprove of REINZ’s involvement within the Property Management industry. Rather than respond to each post individually, I think it is important to make everyone clear as to how we see Property Management evolving and why we see partnering with REINZ as a hugely important way to support our industry.

    Real-iQ partnering with REINZ

    Last September, I first met the new REINZ CEO Bindi Norwell, and since then we have had numerous meetings where we have discussed the future of Property Management. I have been hugely impressed with her enthusiasm for Property Management and willingness to listen and learn. I have also been very impressed with the profile she has given our industry within the media. REINZ have made a real commitment to support the industry through advocacy, providing resources and now education.

    In my opinion, they are the group that has the most political influence and are best suited to represent our industry. I have always shared their view that Property Management should come under the scope of the REA whom should be the regulator of the industry. There is simply too much cross over between Real Estate and Property Management to separate and have them regulated by separate bodies. I also do not share the views that Property Management should be self-regulated. When there are issues of poor practice that involve allegations against a Real Estate agent and a Property Manager, it would be far too confusing for the consumer to have to complain to two separate parties. Keeping the entire industry governed by one body is the only logical answer.

    We believe that the New Zealand Property Management Level 4 Qualification will be the qualification of choice for the industry and our goal is to have the entire industry qualified or working towards it by December 2020.

    We believe that by partnering REINZ, we will be providing the industry with the best resources, training and support and we will be actively promoting Property Managers to become members of REINZ.

    I am fully aware that not all Property Managers and companies will want to be associated with REINZ. Consumers should always have choice and REINZ is no different. If people do not want to be a member of REINZ then I would encourage them to become a member of IPMA. Real iQ works with companies who are associated with IPMA and this group also does good work by its members.

    I have learnt in business that you will not get 100% agreement from all parties. A debate is healthy so long as it is carried out on the correct platform. It should not be a case of us versus them, it should be a case of collectively sitting down and seeking the best way forward for our industry.

    We are proud of what we have achieved in our very short history, but we are fully aware that the task of improving our industry has only just begun. We cannot do it alone and this is why we are proud to have partnered with REINZ, who we feel is best suited to lead the charge to regulate the industry.

    As ever, we welcome your feedback.