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!

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.

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.

Property is all about people and managing tenants is part of the process when renting a property. Landlords need to communicate effectively and in a timely manner when tenants and other parties (tradesmen, property managers, neighbours etc) provide feedback about issues arising.

Long term tenancies are the main goal for many investors and the key to achieving this is to encourage open communication with your tenants. Tenants won’t usually vacate a rental property because of a big issue (like a burst hot water cylinder) but will leave because they are frustrated at the lack of response from a number of smaller issuer. However at times it can be difficult to decide which requests require immediate action and/or are financially viable.

Having an experienced property manager and a long term maintenance plan will assist when considering tenant requests, and ensure your resources are allocated to the right place.

Two of the most important factors to address in order to attract long term tenants are insulation and security. One of the most frustrating issues for tenants is dealing with mould, and reducing dampness and moisture should be the number one priority for landlords. Tenants often request quality window coverings and improving this aspect will help to improve both insulation and security. If insulation and security is dealt with effectively, it will create a healthy environment for your tenants, and help foster a great relationship with them.

Landlords should also address complaints about rodents promptly, and work together with the tenant to solve this problem. Section maintenance and drainage are also issues that should be addressed regularly as overgrown trees can block sunlight and cause blocked spoutings which in turn can cause leaks.

In order to attract long term tenants, landlords need to allocate resources wisely and tenant feedback is an important part of this process. Making aesthetic changes to your property does not make sense when there are issues with dampness and moisture that need to be addressed.

Communicating with your tenants is vital when considering improvements to your rental property, to ensure a balance between meeting their needs and achieving your long term goals.

Many tenants will experience problems with rats and mice at some stage during a tenancy. New Zealand’s mild climate along with an abundant supply of food can help rodents thrive during the summer months. However as winter approaches they will often look for somewhere warm with a plentiful supply of food, and this could well be your rental property. Usually this is not a case of infestation and the problem can be easily resolved by using bait and traps.

The presentation and cleanliness of a property can also increase the chances of rodent infestation. Piles of garden debris and/or garbage left lying around the property (and on neighbouring properties) create ideal places for rats and mice to nest and breed. Regular property inspections and working together with your tenant to tackle the issue will give you a better outcome. Often landlords need to educate tenants on what their responsibilities are in regard to proprety presentation including rubbish removal and ensuring the lawns are mowed regularly. Once these issues are taken care of the landlord could then provide bait and traps (readily available from the hardware store) and ensure that trees on the property are trimmed.

If you have a reoccurring or serious rodent problem, pest control professionals should be used. If the property is infested with cockroaches, it is recommended that professionals are used to treat the problem to ensure thorough eradication. In the case of flea or cockroach infestation, landlords should not assume it is the tenants fault as eggs can lay dormant and could have been in the property prior to the tenant moving in.

Rodent problems should be taken seriously as there is a possibility they could eat their way through pipes causing leaks as well as damage electrical wiring, which could cause a house fire.

If your tenant or property manager has reported a problem with rodents or other pests, then the best solution is to work together to eliminate the problem as quickly as possible. Rodents, fleas, ants and cockroaches do not make pleasant house guests and if left unattended could result in your tenants moving out.

Proactive landlords minimise issues by dealing with problems efficiently, resulting in happy, long term tenants.

Once you have completed a thorough marketing campaign for your rental property and selected a suitable tenant, you will need to negotiate the terms of the tenancy. In order to facilitate this process, the important terms should be discussed by phone at the time of offering the tenant the property.

1. Tenancy start date. You should negotiate a start date that is suitable to both yourself and the tenant. It is common to meet in the middle if there is a period in between when the prospective tenant can move in and the availability date of the property.
2. Weekly rent and bond. The rent and bond amount as well as frequency of payment needs to be discussed with the tenant. Rent should be paid in advance and weekly payments are the norm, but payments can be made fortnightly or monthly if agreed.
3. Term of the tenancy. There are usually two types of tenancies. A Periodic Tenancy has a start date and no end date and continues until either the tenant or landlord gives the required notice to terminate. A tenant can give 21 days’ notice to vacate at any stage during the tenancy, and a landlord can give 42 days’ notice if they plan to sell or are moving in, or 90 days’ notice in any other situation. (For further information on terminating periodic tenancies see Section 51 of the Residential Tenancies Act). A Fixed Term Tenancy has a start date and an end date and cannot be terminated by giving notice. Usually fixed term tenancies are for 6 or 12 month periods. You can apply to the Tenancy Tribunal to terminate the tenancy during the term if either party breaches the terms of the agreement.
4. Chattels to be included. These are items of furniture or appliances etc that are to be included in the rental such as fridge, heating, stove or dishwasher. Any chattels that don’t work or are not included should be discussed and recorded at the start of the tenancy.
5. Other important terms to consider include:

• The maximum number of residents permitted
• Responsibility of lawn and garden maintenance
• Pets or no pets allowed
• Any  other specific terms should be discussed before finalising the tenancy agreement

Once the above terms have been agreed a written tenancy agreement can be completed. This is required by law to record the terms of the tenancy. (The Department of Building and Housing provides a basic tenancy agreement on their site). Once the tenancy agreement is completed, a deposit should be receipted and this is usually one week’s rent. Copies of the agreement should then be issued to all parties. Prior to the tenants moving in a property inspection should take place and a copy of this report given to all parties.

Property management is about people and the tenant selection and negotiation of terms process is all about customer service. Tenancy applications can fall over at the last minute as tenants can change their mind, however a landlord will have a lot more success in gaining a long term tenant if they offer a professional service and have effective communication skills.

An important aspect of property management is managing rent arrears, and monitoring rent payments is an essential component of this service.

All landlords are required to maintain detailed records and this should include the daily monitoring and reconciling of rent payments. Efficient record keeping also has the benefit of reducing the risk of rent arrears, especially if an effective tenant selection process has taken place at the beginning of the tenancy.

Rent is in arrears when the date a tenant has ‘paid-to’ is reached – if your tenant is paid up to today he won’t be in arrears until tomorrow. If a tenant has missed their rent payment then this is a breach of the tenancy agreement and they should be notified immediately. The missed payment could be a result of a misunderstanding or bank error, however if there is no valid reason, a written ‘14 day notice’ should be issued requiring the tenant to pay the arrears within 14 days. This notice is a requirement of the Residential Tenancies Act (RTA) if you wish to make an application to the Tenancy Tribunal to recover any outstanding rent.

Once a ‘14 day notice’ has been issued and if the tenant is less than 21 days in arrears, a landlord can apply to the Tenancy Tribunal to recuperate any arrears (under Section 56 of the RTA). The application can request that the tenancy be terminated along with the refund of the bond to cover any unpaid rents.

All applications to the Tenancy Tribunal go through an initial mediation process to provide opportunity for both parties to reach an agreement for the recovery of rent arrears. This takes place after the expiry of the ‘14 day notice’ (if the tenant is still in arrears), and can take place over the phone. If an agreement is reached at mediation this is witnessed by the mediator and is sealed by the Tribunal as a legally binding and enforceable court order. A bailiff may then use this court order to carry out an eviction if necessary.

If both parties cannot reach an agreement at mediation the case is then sent before an adjudicator at the Tenancy Tribunal. Although Section 56 of the RTA says the landlord has the right to seek rent arrears and termination of the tenancy, the Tenancy Tribunal can let a tenant stay if the tenant has since remedied the arrears, has a valid reason for unpaid rent or can provide an acceptable repayment plan.

Applications to the Tribunal should usually be made under Section 56 (as above) to result in earlier mediation and the recovery of any arrears. However you can alternatively make an application to the Tenancy Tribunal if a tenant is more than 21 days in arrears under Section 55 of the RTA. Under Section 55 there is no need to wait for the 14 day notice to expire and the landlord can seek termination of the tenancy as well as recovery of rent arrears and a bond refund. Unlike Section 56, if the tenant is more than 21 days in arrears at the date of application, the landlord has the right to seek termination of tenancy. In order to facilitate the application, the landlord should provide copies of all documents relating to the tenancy including the tenancy agreement, any notices issued and rent records.

If a Tenancy Tribunal order for termination of a tenancy has been obtained, the landlord can then use this order to apply for an eviction if necessary. This process involves an application to the District Court for an eviction date.

It is crucial for landlords to have a systematic process for dealing with rent arrears. Allen Realty is a specialist Auckland Property Management company experienced in tenancy law, with highly trained property managers that manage rent arrears on a daily basis.