Property Management

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.

As property managers, Allen Realty undertakes systematic reviews on all rental properties on a regular basis. This is an integral part of our specialist property management service and ensures that rents are charged at accurate market levels so that our customers have the resources required for property maintenance.

Professional property managers carry out rent reviews about every six months, and if the rent is considered below market value an increase is issued.

To issue an increase there are several legal obligations required under the Residential Tenancies Act (RTA):

• Landlords shall issue 60 days’ written notice, in addition to a period to serve the notice
• Rents can not be increased within 180 days of the start date of the tenancy, or a previous increase
• There is no limit to a rent increase as long as it is not excessive
• For further information on rent increases go to Section 24 of the RTA

As part of the rent review process, a comparative market analysis should be undertaken—a property manager has the advantage of being able to use both current and historical statistics to measure demand and compare rents with other properties in the surrounding area, as rents vary depending on demand, quality and size of the property. The Department of Building and Housing publishes up-to-date market rent statistics which can be used as a guide to determine market values. Section 25 of the RTA deals with market rent.

In order to encourage long term tenancies and reduce vacancies, rents should be around or just under market value. A sudden large rent increase is likely to encourage your tenant to vacate, whereas regular but small rent increases are viewed as the norm. Landlords who are proactive with rent reviews should also be aware that tenants will expect a higher level of property maintenance.

Now is the time to re-evaluate the nuts and bolts of your rent review practices!

For investors to use a professional Property Management company there must be apparent and meaningful rewards:

1. Does your existing Property Manager / Property Management company offer these benefits?
Peace of Mind through Expert knowledge

Fair wear and & tear is the ongoing deterioration of aspects of a property which has resulted NATURALLY or from AGE. Allen Realty property managers examine all properties regularly and at the end of a tenancy to spot fair wear and tear and/or damage.