Property Management

Most landlords will at some stage have to contend with tenants that owe them money. Bad debts can be minimised to a certain extent by carrying our thorough credit and reference checks at the beginning of a tenancy. However this is no guarantee for a trouble free tenancy and if you do find yourself out of pocket, there is a process that should be adhered to that requires an organised and proactive approach.

It is best practice in the first instance to make an application to the Tenancy Tribunal to have the debt recorded as a Tribunal Order if your tenant owes rent, rates or damages. This not only provides a forum for the landlord and tenant to agree on the debt and a plan to pay it off, but also a means of enforcing the debt.

After obtaining a sealed Tenancy Tribunal Order, a landlord can then recruit assistance from a third party (ie solicitor or professional debt collector) to enforce the debt. The terms of the tenancy agreement should state that the tenant is responsible for any costs involved when collecting debts, and this can then be added to the original debt. It is advisable to employ a professional for debt collecting as emotions can often run high during these proceedings, and they have resources and processes in place that guarantees safety.

There are many debt collectors in New Zealand and they can be found online. They will usually take a commission from the debt they are collecting, and some will not charge any fee if they don’t collect the money. To facilitate the process you should provide them with documentation including tenancy application forms and agreements, copies of photo ID and court orders. Debt collection can take some time so you should ensure the debt collector always has your current contact details.

If you list the debt with a large organisation they will usually list the debt on the tenant’s credit checks so that future landlords are privy to their credit record. The debt is active until the tenant surfaces again, and if they apply for a loan or hire purchase they are required to give their address and undergo a credit check. This process will often alert your debt collector of their new address so they can then serve notice to them.

A creditor (or their representative) can then take further action at the District Court which will add extra costs, but these can also be added to the initial debt. An Order of Examination requires the debtor to attend a hearing where their financial situation will be assessed by the courts. The courts can then enforce an Attachment Order which requires the employer (or WINZ) to pay a portion of the debtor’s salary to the creditor until the debt is settled. A Distress Warrant can be issued if the debtor has assets, which allows a Bailiff to demand payment and seize assets to help recover debt. Both these processes can only be accomplished if you can provide a current address for the debtor, as the law requires they receive written confirmation of a hearing. To discover your tenant’s new address you can make a “confidential address request” to the Department of Building and Housing (DBH) or the Ministry of Social Development.

The Courts and Criminal Matters Bill was recently introduced to “deliver a fit for purpose collections system with simpler, faster and better collection and enforcement services” according to the DBH. When this comes into effect the details of an Attachment Order can be recorded at the hearing as part of the Tribunal Order, enabling the Order to be enforced without requiring a separate hearing.

Property management is all about the process, and by adhering to early systems, procedures and best practise, you will minimise the risk of debts occurring. You should always resolve major damages as they occur to avoid dealing with debt at the end of the tenancy and the bond should never be used to cover rent and should only be used for damages or debt after the tenant has moved out and paid all rent. If you use a professional like Allen Realty Property Management who uses an organised and proactive approach and pays attention to detail, then tenants are more likely to be responsible and settle their debts promptly.

With courts and debt collectors handling increasing overdue fines and overdue debts, creditors have often been frustrated with enforcement processes which are often unresolved. The Courts and Criminal Matters Bill (CCMB) has been introduced to “deliver a fit for purpose collections system with simpler, faster and better collection and enforcement services” according to the Department of Building and Housing (DBH). This bill was passed by Parliament on 7 July 2011 and is intended to come into effect in April 2013.

The District Courts Act 1947 will be revised so that creditors can obtain an attachment order more readily, which requires debtors’ employers (or WINZ) to make regular deductions from debtors’ salaries (or benefits) until the debt has been settled.

The Residential Tenancies Act 1986 will be amended so that Tenancy Tribunal Mediators and Adjudicators can document details of an attachment order at the hearing as part of the Tribunal order. This benefits landlords as an attachment order can be enforced immediately without requiring a separate hearing. However the creditor (landlord) and debtor (tenant) must agree to the attachment order at the hearing which is not ideal, but is an improvement to the current enforcement process.

The Xmas holiday period can be a stressful time for property owners as the rental market slows down. Landlords and tenants can often face financial and time restraints over this period, and tradesmen and tenants can be hard to get hold of as they close down or head away for the holidays. Effective property management is all about “planning for the best, but preparing for the worst” and landlords need to be proactive about being organised, and plan in advance in order to avoid potential problems.

Tenants should be able to contact you at all times and vice versa. If you are travelling overseas during the holiday period you will need to advise tenants of your travel plans and give them your temporary contact details. It is important to note that the Residential Tenancies Act requires landlords to appoint an agent if they leave New Zealand for longer than 21 consecutive days. Also find out your tenant’s holidays plans and ask for an emergency contact number in case they are out of reach.

If you are travelling, it is a huge advantage if can take a laptop and have access to the internet so you can communicate via email. This should have all the necessary tenancy documentation stored on it such as tenant contact details, agreements, ledgers and notices at the very least. If you don’t have a laptop, this information can be stored on a memory stick or emailed to an email address that can be remotely accessed such as gmail and hotmail. It is also advisable to have access to marketing plans, photos of your property and advertisement details in case tenants give notice, thus reducing downtime during tenancies.

It is vital to keep a close eye on rent payments during the holiday period and be proactive about missed payments. If a payment is missed, contact the tenant and issue a 14 day rent arrears notice immediately. If it remains unresolved after this notice, you can then make an online application to the Tenancy Tribunal for recovery of the arrears (you will need a credit card and supporting documentation to do this). If you do not take action immediately, you could be faced with increased arrears and delays in recovering the missed payments.

Plans should be made to deal with any property maintenance issues that may occur over the holiday period. Landlords need to ensure they have contact details for a plumber, electrician etc who will be on-call during this period.

“A problem anticipated can be a problem half solved”. If you have a strategy in place to deal with potential problems, you can avoid unnecessary stress, put your feet up and relax over the summer holidays!

The Auckland rental market has continued to experience strong demand and average weekly rent increases across the board during 2011, although some areas were more subdued with stiff competition for quality tenants.

Allen Realty continues to achieve low vacancy rates and we expect this to continue as the market picks up in the New Year. Although we have experienced a small drop in new tenant queries in the last couple of weeks of November, this is in line with the usual drop in demand over the Xmas and New Year period as tenants are preoccupied with family and holiday activities.

Department of Building and Housing (DBH) statistics show that the average weekly rent for new private tenancies in New Zealand during September 2011 was $328. Click here to view the entire rental market update and DBH statistics.

Section 55 of the Residential Tenancies Act allows a tenancy to be terminated if “the tenant has caused, or has permitted any other person to cause, or has threatened to cause, substantial damage to the premises”.

A tenancy was recently terminated by Allen Realty when extensive damage was caused to a rental property. The tenancy started well but took a turn for the worse when the tenant’s family came to stay. Following a routine property inspection the property manager found holes in the walls and a broken window which the tenant said was caused by her brother following too many drinks.

A 14 day notice was immediately issued requesting the tenant fix the damage, however at the expiry of this notice the repairs had not been carried out and the tenant had also missed a rent payment. An application was then made to the Tenancy Tribunal for recovery of rent as well as a work order requiring the tenant to remedy the damage immediately. At mediation the tenant agreed to repair the damages and pay rent arrears.

The property was then re-inspected and it was noted that the repairs made by the tenant were unsatisfactory and the overall appearance of the property had also deteriorated. After consulting with the owner, Allen Realty issued a 90 day notice to terminate the tenancy and also applied to the Tenancy Tribunal for the immediate termination of the tenancy. The tenants at this stage vacated the property leaving the owner to repair all the damage including repainting the walls so that the property could be re-let.

The tenant didn’t appear at the Tenancy Tribunal hearing, but because they had admitted causing the damage at previous mediation, it was only a matter of Allen Realty proving the tenants had not repaired the damage. The Tribunal awarded repair costs in excess of $7000 and the bond was refunded to the landlord to go towards this debt. The debt was then sent to a debt collector and the tenant is currently making plans to pay this off.

The landlord has also claimed through landlord insurance a portion of the costs of redecorating the walls, which we expect to be successful as the damage caused was deliberate.

Having a systematic tenant selection process reduces the likelihood of tenancy problems, along with regular property inspections, but even with these strategies in place a tenant can sometimes turn bad. A successful outcome was achieved by Allen Realty as a result of our proactive property manager undertaking thorough regular inspections and following through with immediate action, along with knowing the requirements of the Tenancy Tribunal — as the proverb goes “The early bird catches the worm”!

When selecting tenants for a rental property a landlord should complete a thorough tenant selection process in the first instance. A written tenancy agreement is then required before a tenant moves in (under the Residential Tenancies Act 1986).

A tenancy agreement can be downloaded from the Department of Building and Housing’s website, but any agreement should include the following details:

• Property address
• Landlord and tenant contact details
• Tenancy start date
• Type of tenancy
• Landlord and tenant address for service
• Weekly rent, bond amount, rent payment frequency and account number for rent to be paid
• Chattels provided
• Additional information that may affect the tenancy

Once the agreement has been completed it should be filed in a safe place.

While the Residential Tenancies Act will still govern a tenancy if there is no written tenancy agreement in place, landlords should be aware that there are several risks involved. The tenant may claim that they are not the legal tenant and as there is no agreement, stop paying rent. If they are in arrears and damage the property in any way, it is then difficult to prove who is responsible. If you are in this situation it would be prudent to meet with your tenant and draw up a written agreement. If your tenant is uncooperative the Residential Tenancies Act allows you to issue a 90 days’ notice to end a periodic tenancy (even if no written agreement is in place). You can also apply to the Tenancy Tribunal for termination of a tenancy if the tenant is not paying rent or won’t move out.

If you choose to appoint a property management company like Allen Realty, we will arrange the necessary legal documentation and organise bond lodgements. Property managers would then carry out regular inspections, maintenance and rent reviews to ensure a trouble free tenancy.

In the past property management was all about finding the cheapest tradesman to undertake property maintenance work, and property managers would often look in the local newspaper for a contractor without carrying out adequate reference checks and acquiring a warrant of service.

Over the last decade the discovery of leaky buildings, increased insurance obligations and tougher legislation has seen demand for reliable and qualified tradesmen. This includes changes to the Building Act with the introduction of Restricted Building Work that will come into effect in March 2012, which will require Licensed Building Practitioners to carry out or supervise restricted building work.

These changes require landlords and property management companies to change the way they operate when selecting professional maintenance contractors. The focus for professional property managers now is to secure insured, registered and reliable tradesman that complete work quickly and respect the rights and privacy of the tenant. Landlords are now financially liable if work undertaken is to an inferior standard—if your property is damaged due to shoddy maintenance work carried out by an unqualified tradesman, your insurance company will more than likely not pay for repairs.

When requesting a quote from a property manager, it will unlikely be the cheapest price around. Property managers are not project managers and do not focus on obtaining the best price. Although this is important, your property manager is obligated to find a qualified and reliable contractor to ensure all legal obligations are fulfilled.

The Tenancy Tribunal and other legal systems require property managers to act professionally, in its principle’s best interest, with best practice procedures in place. Because of this Allen Realty mostly uses all trades companies for property maintenance. Competitive market prices are negotiated and we ensure they guarantee their service and have the qualifications and insurance required. Your property manager will in some cases be able to provide a second quote, but this may not always be possible. Their job is to protect your investment and they do this by using qualified tradesmen who can complete the job to a high standard in an appropriate timeframe. Property owners of course can choose to organise their own property maintenance and possibly save on fees, in which case the owner is responsible for any work ordered.

When addressing property maintenance, communication is the key for Allen Realty property managers and if requested, we won’t organise any work to be undertaken unless authorised by the property owner first.

Allen Realty follows a strict tenant selection process to ensure a trouble-free long term tenancy followed by frequent inspections and rent monitoring. Despite following this process, occasionally a change in personal circumstances may cause a tenant to fall behind in rent or cause damage to a property.

Recently a tenant of Allen Realty was evicted due to repeatedly failed to comply with a mediated order to pay overdue rent and repair damages. After eviction the property was found in a terrible state: there were holes in doors and walls, kitchen cabinetry and flooring was damaged due to taps left running, windows were smashed and the property was covered in rubbish. This was one of the worst properties viewed by Allen Realty after an eviction, and it was also found to be infested with cockroaches and fleas, which was saddening considering that eight children had been living in the property.

After managing the clean-up and restoring the property so it could be re-let, an application was made to the Tenancy Tribunal for clean-up costs and exemplary costs totalling $15,816.86 (see table below).

Unfortunately the tenants did not appear at the hearing to explain why they caused the damage, however a very successful outcome was achieved with $11.174.58 being awarded, which the tenants are paying off.

In order to present a successful claim to the Tenancy Tribunal, the applicant needs to be extremely organised and provide copies of all correspondence, photos, inspection reports, invoices and quotes, and witnesses if required. A professional property manager is experienced in presenting claims to the Tenancy Tribunal, ensuring a successful outcome for a landlord.

Unit title properties are where an investor owns part of a building, such as an apartment in a building development. It is common for residential apartment buildings such as these to appoint a body corporate to manage common areas such as pools, gym, lifts and lobbies. Body corporates should be up-to-date with the regulations required by the Unit Titles Act to ensure that any necessary obligations are met.

The first Unit Titles Act came into force in 1972 but has recently been updated with the Unit Titles Act 2010 which came into force 20 June 2011. Key changes include:

• clarifying the definition of a principal unit
• a fully integrated and cost effective dispute resolution service through the Tenancy Tribunal
• a comprehensive disclosure regime for buyers, sellers, developers and bodies corporate
• lowering the voting threshold for most body corporate decisions
• creating more efficient and transparent governance and management structures
• clarifying the rights and responsibilities of unit owners and bodies corporate
• stating that the body corporate owns the common property
• creating a more flexible system for calculating how much a unit owner should contribute to body corporate funds
• streamlining a more flexible system for calculating a unit owners contributions to body corporate funds

Although most of the changes to the Unit Titles Act affect property owners rather than tenants, some of the changes will affect how body corporates are managed, potentially creating a need for changes to the building rules and regulations which in turn will have an impact on tenants. The Residential Tenancies Act now requires a statement of body corporate operational rules to be included in tenancy agreements to ensure tenants are aware of their responsibilities.

A new clause of interest in the Unit Titles Act 2010 (Section 81) states that if an owner is leaving the country for more than three consecutive weeks they must assign a person in NZ to act as their agent and inform the body corporate of the agent’s details.

If you own property that is governed by the Unit Titles Act, it is essential you are informed on how these changes could affect you. Your body corporate manager should be able to confirm any changes as well as provide you with an updated copy of the building rules and regulations.

Allen Realty recently achieved great success with Simon Allen winning the 2011 REINZ Awards for Excellence Residential Property Manager of the Year.

This prestigious award is judged and presented by the Real Estate Institute of New Zealand (REINZ) in recognition of excellence in the property management industry in New Zealand. Criteria for the award includes commitment to customer service, significant achievements and innovative methods used to achieve objectives.

Simon’s commitment to building customer relationships, regular blogging on topical issues, innovative business development and marketing along with implementing new initiatives to improve service to clients ensured he was a front runner in the Property Manager of the Year category.

Amanda Asma was also a finalist in the Support Staff Member of the Year category. Her efficiency in her role as administration manager at Allen Realty ensures head office runs like clockwork and this recognition acknowledges all her hard work.

Allen Realty aims to provide customers with outstanding service and the success achieved at this year’s awards is a reflection of the exceptional service provided by the entire Allen Realty property management team.