DIY landlords to escape regulations noose

Despite all participants at recent Housing and Urban Development Ministry (HUD) workshops urging it to lobby the Government to include private landlords, senior officials say it is not in their remit to recommend that.

The reason - private landlords are covered by the Residential Tenancies Act, says Residential Property Managers Association president David Pearse, who was at one of the meetings.

HUD ran the workshops to discuss submissions on the proposed legislation. More than 100 were received during the first few days of the submission period.

Pearse says Associate Housing Minister Poto Williams, who is promoting the legislation, says she found it unusual for everyone across the industry to agree private landlords should be included or at least registered, but he got the distinct impression there will be no change to the regulations as they are proposed. She did invite the association to make submissions. 

The Government’s proposed regulations include property managers being licensed, having to establish a trust account, holding insurance, undergoing 20 hours of professional development and complying with an independent disciplinary and complaints resolution scheme.

“Now it has no intention of pushing for private landlords to be included in the legislation, HUD sees the biggest issue is who will be the regulator and who will oversee the scheme,” says Pearse. “Property managers prefer the Real Estate Authority (REA) as the regulator and those outside the immediate service have suggested MBIE, which already has a deep knowledge of the sector through its involvement with Tenancy Services.”

Pearse says the REA will be a poor choice, even though his association is made up of property managers. “I know of people who have already tried to make complaints to the REA about poor property management service and haven’t got past the front door.”

He says if the quality of property management is going to be improved it has to include private landlords. “The days of DIY landlording are over.”

About 59% of the country’s private rental properties are under management. At the beginning of 2020 this was 49% but there has been a significant swing to property management companies by private landlords since Government legislation was introduced covering the Residential Tenancies Amendment Act, Healthy Homes Standards and new rules phasing out investors’ ability to claim mortgage interest against rental income for tax purposes and the Brightline test extension from five to 10 years.

Pearse argues the proposed legislation should be based on regulations used in Wales. The Wales model includes a register of all property managers and private landlords. “If it was introduced here, tenants would be able to see the register and MBIE could use it to determine which property managers and landlords have or haven’t deposited bonds into the Bonds Office. “If this was a major problem, MBIE could tighten property management rules, particularly if it is the industry regulator as we are suggesting.”

Pearse says a huge number of people are ignorant about property management and the responsibilities that go with it. “Few property owners ask why they get rubbish service but often it comes down to the biggest problem in the industry that is rarely acknowledged - property managers having to manage up to three times the number of properties they can effectively deal with.

“They cannot give good service if they have 300 properties to manage, which is often the case in the bigger agencies. They most they can do is keep on top of arrears. They can’t do property inspections or keep in touch with owners. It is impossible to manage that many properties and many property managers are the meat in the sandwich between owners and property management companies owners.”

As a result, the industry has a high turnover of staff. Pearse says an effective agency will allow its property managers to manage only 100 properties at any time to give full service and client satisfaction. This is an industry about service. It should not be about greed.”

He says this is another area where MBIE could effect change if it was the regulator.