Property Management

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.

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.

All landlords face the prospect of choosing suitable tenants for their rental property at some time or another, and there are important steps involved in this process in order to reduce potential rent arrears and damage to the property.

1. RUN an effective marketing programme. Market the property at a reasonable market rent reflecting demand in the local area and ensure the property is well presented in order to attract as many quality tenants as possible—higher demand will potentially command higher rents. If your property appeals to a wide variety of people you are more likely to receive a greater number of enquiries.
2. PROVIDE a detailed tenant application form. This should include personal contact details, forms of identification, work and rental history, start date required and permission to undertake credit and reference checks.
3. OBTAIN a copy of photo identification (drivers licence or passport is ideal) so there is no disputing identity.
4. VERIFY accommodation, employment and character references. Phone or email all verbal or written references to ensure their authenticity. Also verify the regularity of previous rent payments—a copy of a previous rent ledger will enable you to do this.
5. COMPLETE credit checks. These can be processed by an authorised credit agency—charges will apply. You can also search for any previous Tenancy Tribunal Orders online free of charge. This will tell you if the tenant has ever owed a landlord money from an earlier tenancy.

In a competitive market a tenant may apply for more than one property at a time, so the above steps should be completed quickly so you won’t lose a quality tenant to another property.

Once this process has been followed you will be able to make an informed choice and select the tenant most suited to the property. For further valuable advice on finding tenants go to Attracting & Maintaining Tenants.

Choosing great tenants is a specialised skill, and using a professional property management company means you get their marketing experience along with the added advantage of drawing on their existing tenant database.

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!

Household Insulation

The average NZ home will use around 35% of their total energy bill to heat their home. If there is poor insulation this can mean a lot heat will be wasted.

Nearly 60% of NZ households do in fact have poor ceiling & under floor insulation (Taken from a NZ 2005 House Condition Survey) and homes built before 1978 did not have a need to be insulated, so if you are currently addressing a moisture problem it is a worth-while idea (at the very least) to invest in ceiling and under floor insulation.