The Tenancy Tribunal

Have you ever attended the Tenancy Tribunal with a tenant?  If you have, you will know that waiting times can often be quite long.  As you would also be aware, you MUST have all paperwork in order and have all of your ducks in a row.

This would include a signed, detailed tenancy agreement, an accurate condition report, accurate rent ledger records, invoices, documented evidence, etc.  In addition to this you must have correctly filled in and lodged all Tribunal Application forms!  Have you issued your breach notices correctly?

The answer ……….EXPERIENCE! It’s critically important to have the knowledge and the confidence of presenting all the required information in a professional manner.Let’s hope this never happens, but being prepared is the key.  A property manager working in the industry day in and day out is more likely to be prepared for any eventuality.

My Tenant Stopped Paying Rent!

One of the main frustrations of being a landlord is ‘rental arrears’.It can become very frustrating. Tenants know that when you rent a property, you have to pay your rent regularly and on time.  However, for some, it can be difficult to keep payments on track.
Can a property manager ensure regular rental payment? What can they do if a tenant falls behind in their rental payments? At the start of the tenancy, clear expectations with respect to the rent being on time, every time, should be explained without fail!

Possibly, setting up an AP (automatic payment) can ensure that rent is paid regularly and on time, specifying in the tenancy agreement the day and the amount of the rent to be paid and providing a rental payment schedule.

What can a property manager do when the tenant stops paying their rent or is proving difficult to contact? Communication, communication, communication! 

Firstly, daily phone calls, and text messages. If no contact, the property manager would follow up by property visits.  If still no reply, the property manager could call the emergency contacts noted on their application form and begin the issuing of breach notices. If this all fails an application can be made to the Tenancy Tribunal to terminate the tenancy and recover the outstanding rent.

As a last resort, should the tenant vacate the premises still owing money, it is reasonable to engage a debt collector.

Typically, a DIY owner will take a 1-2 week bond, whereas a property management agency will take 3-4 weeks.  At the end of the day with rental arrears a professional property manager will more often than not make decisions faster and have more expertise than a DIY owner.

Rental industry set to be shaken up by new Labour led-Government

A big-shake up to the residential rental industry is imminent under the newly-formed Labour led Government.

Within the first 100 days Prime Minister elect Jacinda Ardern, New Zealand First leader Winston Peters and co have a mountain of initiatives to tick off.

Labour will hit the ground running in Government, with a programme of work across housing, health, education, families, the environment and other priority areas.

As far as the rental industry is concerned, passing the Healthy Home Guarantees Bill, which will ensure that all rental properties will meet a minimum standard of insulation and heating, is top of the list.

This Bill is awaiting it’s Third Reading and should be passed into law by the end of the year.

The Residential Tenancies Act Amendment Bill, which is proposing changes to tenant liability, unlawful tenancies and methamphetamine, should also be passed into the law at some stage.

Only the Greens voted against National’s Bill in its First Reading and unless Labour and New Zealand First flip, these changes should come into effect.

However, with the Bill currently at the Select Committee stage, don’t be surprised if there are subtle changes before it’s Second Reading.

Extending Notice Periods to 90 days

The biggest changes that Labour have proposed face a lengthier wait.

Labour’s rental policy include scrapping letting fees for tenants, extending notice periods to 90 days abolishing “no-cause” terminations and limiting rent increases to once a year.

All these changes, particularly the adoption of the Australian model for letting fees, where property managers bill the landlord for the cost of finding a new tenant, will create a fair amount of disruption to the industry.

Tenancy consultant Scotney Williams believes these proposed changes reflect the current state of flux in the industry.

“Landlords and property managers will have to accommodate significant changes to their business model,” Williams said.
“With the new Government promising to abolish the requirement for tenants to pay letting fees, property management firms will have to charge their owner clients a fee to replace the abolished letting fee formerly paid by tenants or suffer reduced income.
“Property managers and landlords will also find terminating periodic tenancies much harder with the removal of the “no cause terminations, involving the use of the 90 day Notice”.

Labour’s rental policy isn’t a priority in their first 100 days in office.

But that doesn’t mean it won’t happen and there is a possibility that the Greens’ initiative of a compulsory Rental WOF could be added to the mix.

A lot will depend on New Zealand First.

Sound familiar?

Is your rental property completely compliant?

There has been a case recently where a tenant has been able to claim a refund through Tenancy Tribunal when the tenant found out that the property was not fully compliant.

Without going into too much detail of the case, some work had been done to convert part of the premises into a living space by a previous owner but the work did not have a permit. The new owner was not aware of this and there is no suggestion that this was intentional.  The landlord as soon as he was made aware of the situation obtained a Certificate of Acceptance. There are other parts of this story but no need to go into those at this stage. The tenant was refunded the rent paid even though this was just a small part of the property and the property was in excellent order.  The Tribunal decided the tenancy was not legal.

This got us thinking about how far this could go. We have to be very careful with the word sleepout and unless we know it is permitted as such we will only allow it to be a hobbies room or similar. So, do not allow a tenant to sleep anywhere that is not correctly permitted. Some tenants think they can sleep in the garage!
 
We must make sure all situations are covered that require permits or compliance certificates: wood burners, electrical work, plumbing etc. It is not just insurance issues that may come back to bite us, but also possible Tribunal claims. We do ask all owners when they sign up with us if everything in the house is compliant. However you don’t know what you don’t know and if you buy a house without a LIM report it could come back to bite you.

If you are thinking about buying an investment property we strongly recommend a LIM report and a meth test as part of the agreement. In addition to this plumbing and electrical reports would be a wise move. By the way, do not forget to find out what the insulation is and to what standard; that could save you a heap of money going forward.

The cost to self-managing landlords for ‘poor management’

Nothing is worse than when a disgruntled tenant throws the book at you and you have to defend yourself.

Professional property management provides a strong layer of protection for you at a relatively minimal cost.

Imagine for a moment your current tenant gets ‘offside’ with you about a relatively minor disagreement, or if they take exception for you filing a legal notice against them for something rather small (e.g. cleanliness, rent arrears or disturbing neighbours).  

Or, you want to claim the bond back, the tenants are upset and again they file against you.

The potential court imposed costs through ‘poor management’:

• Discrimination (up to $4,000)
• Not providing an address for service (up to $500)
• Being overseas for longer than 21 days without appointing an agent (up to $1,000)
• Requiring ‘key money’ (up to $1,000)
• Requiring a bond that is too large (up to $1,000)
• Requiring un-authorised security (up to $1,000)
• Not lodging the bond within the correct time (up to $1,000)
• Requiring more than two weeks rent in advance (up to $1,000)
• Charging a rent too high relative to the market (by order) (up to $200)
• Failure to provide a tenant receipts for rent (up to $200)
• Failing to keep adequate records (up to $200)
• Getting rid of tenants goods incorrectly (up to $2,000)
• Interfering with tenants privacy (up to $2,000)
• Non-compliance around means of escape from fire (eg alarms, locks etc) (up to $3,000)
• Not meeting obligations around cleanliness (up to $4,000)
• Not meeting obligations around maintenance (up to $4,000)
• Not meeting obligations around smoke alarms (up to $4,000)
• Not meeting obligations around insulation (up to $4,000)
• Not meeting obligations around building matters (up to $4,000)
• Not meeting obligations around health and safety (up to $4,000)

If you have not complied, or are not currently complying with the list above you are running a risk.  Getting good advice from a professional property manager can really help. Give your property manager a call now to discuss about this.

Avoiding Some Common Landlord Traps

Tenants from hell, high loan repayments and persistent maintenance problems can conspire to make landlords feel investing in residential property is best left to suckers.
Bricks and mortar, however, remain one of the most popular and effective ways to build long-term wealth. Property investors should always look at taking a long-term view.

Bad tenants
Poor tenant selection can be a major trap. Signing up a bad tenant can lead to a series of problems that may be time consuming and expensive to fix. You need to screen prospective tenants carefully. A professional property manager will be able to help with this. They have access to default registers that lists tenants who have caused past problems. It is important to check and phone all of the referees, past property managers and all details provided by the applicant.

Where’s the rent?
Tenants from hell aren’t always those who trash your property. Those who don’t pay the rent or continually slip behind in payments can be just as painful for landlords. If a tenant is late in paying rent, it is important to take action immediately. This serves two purposes. First, it ensures that the outstanding rent is followed up and hopefully collected as soon as possible. It also communicates to the tenant that if they are late in paying, there will be immediate action taken,
The short-term problems that can plague landlords can be avoided or at least reduced with planning and research which sets a good precedent going forward.

No insurance
A landlord insurance policy eliminates unnecessary risk and potentially expensive payouts. Landlord insurance provides a safety net and peace of mind. It can provide you with cover against malicious and accidental damage to your property by tenants. It can also protect you from loss of rental income as a result of a tenant absconding or damaging a property and leaving it unable to be relet while repairs are made.

Overcommitting
Many property investors use negative gearing to get a nice tax refund but should remember they don’t get all their expenses back. With rental income yields below home loan interest rates, investors need to ensure they have the spare cash to cover not only the interest cost differential but also such expenses as rates, maintenance costs and management fees.

Can you fix it?
When maintenance or repairs are required, landlords should act as quickly as possible. As a landlord, once you have been alerted to maintenance issues, it is your responsibility to act or authorise your property manager to take the necessary action.

Failure to do so can be a legal liability risk. If a maintenance issue arises and you are slow to fix it, you may be held legally liable if your tenant injures themselves. Landlords should be proactive with maintenance. Regular routine inspections will highlight areas that need attention and it’s a good idea to implement a regular maintenance program.

Tenants as friends
Ideally the relationship between landlord and tenant should be at arm’s length. Too close a relationship can lead to difficulties down the track, especially in situations where the parties have a falling out. It is best to have a professional property manager that won’t be swayed by any personal interest.

No inspections
Conducting regular routine inspections and documenting the information can alleviate many possible problems. Many landlords who self manage don’t conduct regular inspections. This can have two consequences. If a tenant is causing damage to a property and regular inspections are not being held, the damage may go unnoticed and be costly to fix later on. Second, if maintenance issues occur and are not fixed, legal liability issues may arise for the landlord if the tenant injures themselves.

Self-managing
People who don’t have the time, the knowledge or an interest in property management can get burned if they try to be their own property manager. Many landlords simply don’t have the time to respond to maintenance requests or conduct regular inspections to address potential liabilities. While it can be tempting to save a small percentage of rental income by self-managing your property, the benefits of appointing a property manager far outweigh costs.

Consider Your Tenant When Selling

If you are looking at selling an investment property it is important to consider the tenant in the situation and understand that they can often feel their security and enjoyment of the premises has been affected.

Tenants can cause quite a bit of a problem and hinder viewing inspections should we not be able to get their cooperation. Though legislation requires that they allow viewing inspections to potential purchasers, the delays and legal process will cause everyone a lot of inconvenience.

Therefore it is important if you are thinking of selling discuss this first with your property manager who can then work with your tenant to grant you the access you require in a diplomatic manner.

Sometimes however it might be necessary to offer the tenant some monetary compensation, such as a reduction in rent payments for the period that the property is on the market.
Let’s face it, if the sale is going to reap some big monetary rewards it makes good sense to ensure the process is smooth and possibly invest a little to ensure that it does. This should also assist for better presented properties as well as cooperation with access.

Selling does require good planning and thinking ahead so be sure to contact us as your property manager first before listing your property for sale.

Future Investments?
Are you new to investing or have you thought of expanding your existing investment portfolio? Congratulations!
Planning ahead can be the difference between achieving your goals or simply aspiring to them. You have heard “be prepared” before!

Speak to your financial advisor or accountant about your objectives and timeframe. They will help you to consider any risks. The more specific and prepared you are the better chance you have of success. Remember to be flexible to cater for changes and challenges that the real estate and financial market may present.

Share your objectives with your current Property Manager, they may have the perfect opportunity for you without the leg work!