Issue 71 - March 2011 - So you want to manage your own property investment?

First, may I say that we are advocates of self-help.  We firmly believe that most people should be capable of managing their own investment properties,
given that they possess sufficient time, knowledge and skill.

There is a perception that owning and running a property investment requires merely that a property is acquired and tenants installed, for the money to start flooding in. If that was all there was to it, there would be no point in us continuing to offer a property management service.

Unfortunately for property owners, quite apart from the pitfalls inherent in tenant selection, there is a minefield of laws, under various Acts of Parliament and a host of regulations that must adhered to, and most property owners would not be aware of 10% of them.  Add to that the difficulties and delays inherent in our creaky courts system and it becomes obvious that managing properties is certainly not for the faint-hearted.

The main Act that has to be adhered to is the Residential Tenancies Act 1986 and its various amendments. These are available on line, by the way, so there is absolutely no excuse for lack of knowledge.

Despite that, we sometimes find property owners who collect bonds but don’t lodge them with the Department of Housing (and who could, therefore, be liable to a fine of $2,000); owners who haven’t issued rent receipts ($200 fine); requiring more than 2 weeks’ rent in advance ($1,000 fine) or those who collect more that the legally allowable bond of 4 weeks’ rent equivalent ($1,000 fine). This last can happen where the would-be tenants own a dog and the property owners feel that it is only fair that extra bond be given to them. Fair, possibly – but also illegal!

While many landlords will not be found out, it requires only a disgruntled tenant to contact the Housing Department for the full force of the law to come down on the landlord.

One very important amendment that came into force on 1 October 2010, and of which very few property owners will be aware, is the requirement under Section 16A, to appoint an agent (not necessarily a professional property manager), in the event that the owners are going to be absent from New Zealand for more than 21 consecutive days. The agent legally takes the place of the owner and has all the owner’s rights and obligations as against the tenant. The fine for contravention of this is $1,000.

Finally, in respect of Sec 45, under landlord’s responsibilities, there are various provisions relating to the fitness of the premises for their intended use and has a requirement that everything about the property complies with any other enactment insofar as that Act applies to buildings and health and safety.
Failure to comply is an unlawful act – with a $3,000 fine.

This catch-all requirement means, for example, that it is the landlord’s responsibility to ensure that for any gas appliance on the premises, there is a gasfitter’s certificate both for the appliance and its installation. How, then, to stop the use by some tenants, of their own gas hobs, inside the kitchens? They are illegal if not certified. They become the property owner’s responsibility. Fine: $3,000

Similarly, the buildings themselves, under this part of the Act, should have a Code of Compliance. We see too many converted garages, sheds, and other buildings that owners want to rent out, but which would not have a Code of Compliance and wouldn’t have a hope of getting one in their present state. Fine: $3,000.

While the Residential Tenancies Act contains many other unlawful acts that can give rise to fines, there are also traps for the unwary in other Acts, the main ones being: Privacy Act 1993, Human Rights Act 1993 and Unit Titles Act 2010.

Apart from all of the above, there are some things of which owner/managers need to be aware. A big, big trap is letting privately. Some tenants will always try to rent privately as they know that owners are less likely to go through the rigorous checks (such as credit checks and prior landlord checks) that a good agency will conduct.

Too many owners can’t be bothered making these checks, however, believing that they can tell, just by looking at the tenant, whether that person is or isn’t a good risk. Most times, they are wrong. Believe me – we get plenty of practice and we are still unable to tell, so how is an unpractised owner/manager able to do it?

Help is at hand, however. If you have a problem with your tenancy and need some help, please call us. If we are able to assist, we will gladly do so, with no strings attached.  Our number is 827-0555.