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2017, The Good, The Bad and The Ugly

  • A Year of unprecedented upheaval comes to an end

  • We review the last 12 months picking out the good, the bad and the ugly

It is hard to know where to start in a year where property and in particular renting, has featured so much in the limelight. In our final blog of 2017, we summarise what we believe is the good, the bad and of course, downright ugly. 

The list we provide comes in no particular order and is purely our opinion, however, we would love to hear your feedback on what has been without a doubt, an intriguing year. First of all, lets keep it positive and start with the good.

The Good

The Announcement of Banning the Letting Fee:  Some of you will be amazed to hear me say this, however after the initial shock of the impact of the change of Government, I honestly believe that the removal of the fee will be of long-term benefit to the industry as a whole. 

In my opinion, we have become complacent in charging this and you simply cannot justify charging a tenant a fee for $800 in one region and $300 in another just because the rent is different. The removal of the fee will make us innovate and look to develop new income streams. A great focus will be on maintaining properties and improving their capital value. Evidence has shown that the more companies spend on maintenance the longer the tenants stay on in the property. A marketing or administration fee will be charged to the landlord who will subsequently increase the rent.

The other impact this will have is that we'll see less of an incentive for more startup Property Management companies. I do not want to be the person to stifle ambition, but the reality is we have far too many companies undercutting each other and the removal of the fee should put a massive slowdown in the number of startups.

The Relaunch of the NZRPM Level 4 Qualification:  Ok, we have an interest in this as a company, but nobody can deny the benefits of being qualified and early evidence suggests the take up will be big.

For me personally and the team at Real-iQ, being involved in the roll out of this has been the highlight of the year and it is much improved from version 1 which was largely irrelevant. We expect a busy 2018 getting the industry qualified.

The Healthy Homes Guarantee Bill: Regardless of what your political stance is, I have no doubt that long-term, this bill will benefit the country as a whole. Many properties around New Zealand are of poor standards and this contributes to ill health, a strain on the healthcare system and a lack of productivity. A country as progressive as ours should not have the most vulnerable living in third world property. Unfortunately, it still happens. My only concern is that the standards that will be set will be too draconian with the new Government rushing through legislation without proper consultation.

The Bad

Tribunal Crazy Decisions: This is in recognition to Dunedin adjudicator J Wilson who awarded the tenant over $10,000 claiming that the landlord had rented out a non-complaint property. The decision caused a sense of panic that we had gone way too far in beating up landlords. Vic Inglis, the landlord, did not know that the converted kitchenette did not have consent and only when the tenant subleased the property the issue became a problem. The tenant had the nerve to claim a full refund in rent even though they had subleased the property without consent. Fortunately, the landlord appealed and it was overturned by the Judge at District Court. The reason being that the tenant did not suffer due to the lack of consent and it was only a technical breach. The property received its necessary compliance and commonsense prevailed.

I would have loved to see the landlord take the tenant back to Tribunal to receive damages for the removal of smoke alarms and subleasing without consent. I wonder how the adjudicator would have ruled it. I also wonder if the tenant has paid back all the rent!

A knock on effect of this case has been the increase in opportunistic tenants seeking rent refunds for non compliant properties.

 Vic Inglis had an eventful 2017 as a landlord.

Vic Inglis had an eventful 2017 as a landlord.

Not to be outdone, I was witness to a remarkable decision by an adjudicator in Lower Hutt. A client had been advised that a tenant was allegedly doing drugs on the property after a composite drug test result came back in excess of 65 micrograms from seven swabs for a small two bedroom unit. When the Property Manager gave the tenant notice under s.59a (7 days property badly damaged not habitable) the tenant refused to leave. An application was made but was subsequently dismissed as the adjudicator needed to see discrete individual samples so he could ascertain that the rooms were over the 1.5 micrograms guidelines. Surely basic maths comes into the equation. 65 divided by 7 leaves an average of 9.3 meaning it is a mathematical impossibility that the property was safe.

Not according to the adjudicator. Case dismissed!

Too Many Landlords in Denial: I fear that many landlords falsely believe that their properties are compliant and as the 2019 deadline for insulation comes closer, many of them could be in for a rude awakening, especially now that tenants are becoming way more aware of their rights.

A number of landlords will be up to speed as to what is required but many still are oblivious as to what they need to do to ensure their properties are compliant. Throw into the mix the fact that tenants will need to have the means to maintain their rental properties to a particular temperature as part of the Healthy Homes Guarantee Bill, I can picture many landlords rushing to find Heatpump and Insulation installers at the eleventh hour. Don't put it off guys, get in done now or risk Exemplary Damages up to $4,000.  I suspect that adjudicators up and down the country will be more than happy to make examples of people.

It is also a good time to be in the heating and insulation business.

The Ugly

The Undercutting of Fees: Everywhere I go I hear complaints of companies undercutting fees to simply win the business, many going as low as 5% to secure business. By doing this, we are slowly damaging the quality of service that we are providing to the consumer and doing no good for the reputation of the industry.

This is a sign of desperation from many companies. With over 50% of Property Management companies managing less than 200 properties, profit margins will be all but non-existent.

If ever there was a time to regulate the industry it is now. Increased legislation should kill off many of these small cowboy operators. At the start of the year, I predicted more properties would be managed by fewer companies and budget boutique Property Management would die. You can still do boutique management, but you must charge accordingly.

The Northland Shooting: This was the low point of the year. A mother and daughter heading off with a contractor to a property in a remote rural location and being gunned down and murdered. What, if anything, has changed?

The risks are still apparent yet many people put it down to just 'being in the wrong place at the wrong time'. I do not subscribe to this view. Better training for Property Managers will help go a long way to prevent incidents such as this from happening. It may have been unavoidable but it simply cannot be brushed under the carpet.

What is good to know is that WorkSafe is investigating the events and I for one am glad to hear this. They will no doubt release their findings in 2018 and we sincerely hope that changes are made to ensure that all Property Managers are safe. Assaults and threats to Property Managers are common as highlighted in our 2017 study. Many are martyrs to the demands of their landlords and put themselves unnecessarily in harm's way. Let's hope lessons are learned from the tragic events and do not happen again.

Other Notable Mentions

The Rental Warrant of Fitness: Right intentions but needs work. Expect to see this become mandatory as part of the Healthy Homes Guarantee Bill.

Labour and new Housing Minister Phil Twyford: Delusional or visionary? Only time will tell but I for one, have my doubts.

Tenant Power: Tenants are becoming a lot more demanding as their rights have been broadcasted across the media. This is one thing which is apparent from our 2017 Property Management Survey. 

New Meth Guidelines:  0.5 to 1.5. Why wasn't Dr. Nick Kim part of the committee? He appears to be the only voice of reason on this matter as the gravy train continues to run. Labour has made some worrying comments around rent abatements if tenants cannot be held responsible for contaminated properties. More $$$$$ for the Meth testing and cleaning companies!!

The Rise and Rise of the LPMNZ Conference: Out of all the conferences I attended this year, this one has become the stand out for the Property Management industry. Well marketed, great speaker line up, stunning venue and great to see the awards as part of the conference. Well done to Bob Walters and team.

It would be great to hear your choices for the Good, Bad and Ugly of 2017. In the meantime, take care of yourselves over the Christmas holidays. Look after your families and we wish you an enjoyable and relaxing break.  We look forward to connecting with you in 2018 with our predictions for the year ahead.

David Faulkner