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The Haze Blog

Property Management after COVID-19

19 June 2020

It’s that word that we all despise again. The last one almost crippled our country; however, that was a global recession. BNZ Economists are talking of a domestic recession due to the impact of the CoronaVirus and widespread droughts throughout New Zealand.

The forestry sector is suffering with an inability to export wood to China (our largest wood importer) amid the CoronaVirus epidemic as well as the Chinese New Year. Forestry has cooled significantly and what should concern everybody is that it accounts for 7% of New Zealand’s total GDP.

While 7% may seem small, it’s double what our dairy industry contributes (being only 3.5% of GDP). Economists cite that previously GDP has dropped 0.5% to 1.0% during widespread droughts, the result of such dramatic economic turmoil is the increasingly likely domestic recession.

What does the recession word mean for property investment and buyers though? Well, the Reserve Bank will likely attempt to keep the status quo and prop up our economy. However, should the CoronaVirus outbreak continue, China will remain at 50% strength. In 2018 our exports to China were worth $16.6billion dollars – if the outbreak continues at it’s current pace or worsens then New Zealand could be looking at a loss in exports in the billions of dollars. The knock-on effect of such a dramatic drop will be significant and could see banks tighten up on lending restrictions.

Property in general would likely see a cooling of sorts, but especially in the investor market where it’s already rumoured to be more difficult now than two years ago in terms of lending criteria and bank restrictions. This is despite the Reserve Bank continuing to try and prop up the economy through low OCR rates.

Only time will tell what the result is going to be… will it be a significant impact leading to domestic recession? or will it be a small-scale impact as forecast by the RBNZ?

https://www.interest.co.nz/business/103674/bnz-economists-caution-hit-nz-economy-our-worsening-big-dry-could-be-bad-impact

https://www.stats.govt.nz/news/new-zealands-exports-to-china-trump-sales-to-australia-and-the-united-states

https://www.google.com/search?q=forestry+percentage+GDP+NZ&rlz=1C1CHBF_enNZ752NZ752&oq=forestry+percentage+GDP+NZ&aqs=chrome..69i57.6390j0j7&sourceid=chrome&ie=UTF-8

https://www.rnz.co.nz/news/country/325078/dairy-sector-contributes-3-point-5-percent-to-gdp-report

COVID-19, droughts... - They're talking recession

20 February 2020

It’s that word that we all despise again. The last one almost crippled our country; however, that was a global recession. BNZ Economists are talking of a domestic recession due to the impact of the CoronaVirus and widespread droughts throughout New Zealand.

The forestry sector is suffering with an inability to export wood to China (our largest wood importer) amid the CoronaVirus epidemic as well as the Chinese New Year. Forestry has cooled significantly and what should concern everybody is that it accounts for 7% of New Zealand’s total GDP.

While 7% may seem small, it’s double what our dairy industry contributes (being only 3.5% of GDP). Economists cite that previously GDP has dropped 0.5% to 1.0% during widespread droughts, the result of such dramatic economic turmoil is the increasingly likely domestic recession.

What does the recession word mean for property investment and buyers though? Well, the Reserve Bank will likely attempt to keep the status quo and prop up our economy. However, should the CoronaVirus outbreak continue, China will remain at 50% strength. In 2018 our exports to China were worth $16.6billion dollars – if the outbreak continues at it’s current pace or worsens then New Zealand could be looking at a loss in exports in the billions of dollars. The knock-on effect of such a dramatic drop will be significant and could see banks tighten up on lending restrictions.

Property in general would likely see a cooling of sorts, but especially in the investor market where it’s already rumoured to be more difficult now than two years ago in terms of lending criteria and bank restrictions. This is despite the Reserve Bank continuing to try and prop up the economy through low OCR rates.

Only time will tell what the result is going to be… will it be a significant impact leading to domestic recession? or will it be a small-scale impact as forecast by the RBNZ?

https://www.interest.co.nz/business/103674/bnz-economists-caution-hit-nz-economy-our-worsening-big-dry-could-be-bad-impact

https://www.stats.govt.nz/news/new-zealands-exports-to-china-trump-sales-to-australia-and-the-united-states

https://www.google.com/search?q=forestry+percentage+GDP+NZ&rlz=1C1CHBF_enNZ752NZ752&oq=forestry+percentage+GDP+NZ&aqs=chrome..69i57.6390j0j7&sourceid=chrome&ie=UTF-8

https://www.rnz.co.nz/news/country/325078/dairy-sector-contributes-3-point-5-percent-to-gdp-report

Residential Tenancy Reforms - what you should know

18 February 2020

On 17 February 2020, the New Zealand Labour-led Coalition Government released the proposed changes to the Residential Tenancies Act 1986.

For those of you that don’t fully understand what this piece of legislation is, it is the law governing the letting and on-going rental of an investment property in New Zealand. The legislation covers everything from what information must be recorded on a Tenancy agreement to what security money is permitted for collection at the beginning of a Tenancy.

Back in 2019, the Government announced that a raft of changes would be proposed and likely enacted prior to the 2020 General Election. The changes outlined in that announcement were “the removal of the 90-day no cause termination”, “banning rental bidding”, “increasing notice periods on sale or owner moving in” and more…

With the release of the draft legislation yesterday we now know exactly what is being changed and the change is significant. Numerous sections have been amended and there are additions such as the “3 strike anti-social notice” that will have a profound impact across the industry.

Anti-Social Behaviour:

Probably the most contentious issue is the removal of the 90-day “no cause” termination and replacement of that legislation with the “3 strike anti-social behaviour” policy.

This change has been well documented and outlines a specific process that must be followed such as written documentation that is provided to the Tenant of each anti-social event, followed by requirement to issue a 90-day notice within 28 days of the third documented breach.

Further restrictions such as Section 3 specify limitations:

(3) However, the Tribunal must not make the order if satisfied that—

(a) doing so would be unfair because of the circumstances in which the behaviour occurred or the notices were given; or

(b) in making the application, the landlord was motivated wholly or partly by the exercise or proposed exercise by the tenant of any right, power, authority, or remedy conferred on the tenant by the tenancy agreement or by this or any other Act or any complaint by the tenant against the landlord relating to the tenancy (unless the Tribunal is satisfied that the purported exercise or the complaint was or would be vexatious or frivolous to such an extent that the landlord was justified in making the application).

Pecuniary Penalty Orders:

The changes introduce a new $50,000 penalty for Landlords that own or manage more than 6 rental properties in New Zealand.

Here’s a quick extract of this section:

109B Tribunal may make pecuniary penalty orders

(1) The Tribunal may, on the application of the chief executive, order a landlord to pay to the Crown the pecuniary penalty that the Tribunal determines to be appropriate if the Tribunal is satisfied that,—

(a) at the time of committing the unlawful act, the landlord was a landlord with 6 or more tenancies (see section 2(2B)); and

(b) the landlord intentionally committed an unlawful act under any of the following provisions:

(i) section 45(1A) or 66I(4) (landlord’s responsibilities: cleanliness, maintenance, smoke alarms, healthy homes standards, and buildings, health, and safety requirements):

(ii) section 45(1AB) or 66I(5) (landlord’s responsibilities: contaminated premises):

(iii) section 54(3) (retaliatory notice of termination):

(iv) section 60AA (acting to terminate without grounds):

(v) section 137(2) (contracting to contravene or evade the provisions of this Act).

(2) The chief executive may not make an application under subsection (1) later than 12 months from the date on which the chief executive first became aware of the unlawful act.

109C Maximum amount of pecuniary penalty

The maximum amount of pecuniary penalty for an unlawful act referred to in section 109B is $50,000.

109D Considerations for Tribunal in determining pecuniary penalty

In determining an appropriate pecuniary penalty, the Tribunal must have regard to all relevant matters, including—

(a) the nature and extent of the unlawful act; and

(b) the nature and extent of any loss or damage suffered by any person because of the unlawful act; and

(c) any gains made or losses avoided by the landlord in the unlawful act; and

(d) the circumstances in which the unlawful act took place.

109E Only 1 pecuniary penalty order may be made for same conduct

If conduct by a landlord constitutes an unlawful act under 2 or more provisions, proceedings may be brought against that landlord for the unlawful act under any 1 or more of the provisions, but no landlord is liable to more than 1 pecuniary penalty order for the same conduct.

Mandatory rental receipts and written tenancy agreements:

The proposed changes will make written tenancy agreements mandatory. No longer will it be acceptable to enforce a “verbal” tenancy agreement through the Tenancy tribunal.

Likewise, providing a tenant with receipts for payments made to the Landlord will become a requirement and a Landlord that breaches that provision can be subject to a fine.

Expansion of Tenancy Compliance powers:

The proposed changes will also grant the Tenancy Compliance team additional powers such as the ability to issue infringement notices for infringement offences, improvement notices and enforce undertakings.

What we’ll likely see is a more proactive approach from the compliance team in ensuring that all rental properties are up-to-standard and where they aren’t, the cumbersome process of issuing charges through the Tenancy Tribunal is negated and replaced with the Compliance team’s ability to issue infringements and fines on their own.

Conclusion:

The cost of being a “bad landlord” is going to be significant. The cost of being a “bad property manager” is going to be event greater.

The proposed changes to legislation are going to reshape our rental industry and what we’re going to see is an increase in management by property management companies. Private Landlords aren’t going to risk dealing with the significantly larger unlawful acts and penalties as well as additional penalties that could make or break an investors investment.

Pineapple gutters - renting tips

21 December 2019

This past week we started our weekly snippets of tips and tricks for both Landlords and Tenants. The aim of this campaign being the provision of clean, dry and healthy homes to all Tenants and the longevity of Landlord’s investments.

Over time we will cover what should be cleaned on vacate, what the Landlord is obliged to do, how to comply with the healthy homes legislation and what that piece of legislation requires, as well as in-depth analysis of different aspects of the Residential Tenancies Act 1986.

Education is key in our industry and we’re here to promote it as best we can!

Recent Stuff article - our suggestions to the government

20 December 2019

We contributed recently to a Stuff article that highlighted the very real issue of current Landlords looking to sell up over the proposed changes to rental rules. The issue is real, it’s prevalent and it’s happening.

A lot of commentators and other people are right though: a lot of those going up for sale are being picked up by other investors. The problem is, a lot of them are also being picked up by First-home buyers.

Contrary to popular belief. First-home buyers who are purchasing these properties can afford to do so because they have a deposit. Your average tenant does not have that deposit nor can they afford to save for one. Now think of this: if our rental stock is decreasing, what is the inevitable after effect? what has commonly happened in human history where a commodity has become scarce and prized by numerous others? the price of that commodity increases!

That is the reality of the proposed law changes, that is the reality of what is happening irrespective of the “other investors will buy” fact. Because they will, but the supply is still ridiculously short and people are still without homes and people still cannot afford to rent at current prices, imagine prices increasing even more.

The changes are influenced by the following reasons according to the Associate Housing Minister:

“The changes are ‘aimed at achieving an effective balance of the rights and responsibilities of landlords and tenants’, he says. ‘They are designed to stop exploitative behaviour by a minority of landlords.’

Because of the behaviour by a minority of landlords, the majority are struggling to keep up with the ever-changing rental industry. This isn’t just opinion either, it’s fact and it’s being experienced across the board. (See “An industry under pressure” by Property Brokers 18/12/2019)

The question from us is: would it not be more beneficial to 1. regulate the property management industry, 2. educate landlords and tenants and 3. require an education course or even licensing for private landlords?

Now again, do not get me wrong, there are some good proposals in the reform such as banning rental bidding – my primary concern is the 90-day notice reform and the knock-on effect this will have in the Tenancy Tribunal.

At present it takes 4 – 6 weeks to get a Tenancy Tribunal hearing. You aren’t able to apply to the Tenancy Tribunal for a termination and possession order until after the 90-day notice expires, because most times, you just won’t know if the tenant is going to carry on and ignore it.

In these circumstances you end up with 4 – 6 weeks rent arrears and a high likelihood of property damage. There goes your bond and now the landlord is left with another cost that, in most circumstances, is recovered at $30 per week until the debt is repaid.

The logic behind the reform and the requirement of “3 instances in 3 months” to prove your case – it’s absurd and it won’t work.

Bring on a reform of the Tenancy Tribunal’s processes – allow 90-day notices to be dealt with in a similar manner to abandonment applications whereby it can be decided without attendance, or hire more Adjudicators to ease the pressure.

Either way, betters options available to the Government aren’t very limited at the moment when you look at the current proposal. I live in hope that along the way and throughout consultation some good suggestions will come forward that are thoughtfully considered and adopted. Perhaps one of them will be our suggestions? you never know…

Ignore your notice - It can cost you as little as $1000

7 December 2019

With the housing market how it currently is, it’s no surprise that tenants who have been issued a 90-day notice are blatantly choosing to ignore that notice. Unfortunately, despite the housing situation being dire, you aren’t doing yourself a favour by breaching the Residential Tenancies Act.

Section 40 of the Act outlines a tenant’s obligations at the end of a tenancy. One of those obligations is to “quit the premises”, and failing to do so is outlined as being an “unlawful act”.

But it isn’t just a $1,000 fine that should have you worried… our company in particular utilises a company called illion tenancy. This particular company holds the largest tenant database in all of New Zealand and most multi-bureau credit checks and competent property management companies use illion tenancy as part of their tenant vetting process.

So what does this mean:

Every breach letter that we issue to a tenant is lodged with illion tenancy – we take breach letters seriously and utilise these as a last resort; however, if we have to issue a breach letter, we lodge it with illion tenancy.

At the end of a tenancy, we lodge a tenant review – a tenant review can be good or bad, a bad review could have disastrous consequences on your ability to rent again in future.

Basically, a breach letter or tenant review on illion tenancy has the potential to adversely affect a tenants future renting prospects. Is it really worth it?

The reality is that if you stay on past the 90th day, the landlord will most likely apply to the Tenancy Tribunal and a hearing will be held between 4 – 6 weeks after filing. If you happen to think appearing at the Tribunal and using the housing crisis as a reason for the Adjudicator to set aside the 90-day notice, you’re mistaken. In fact, it’s very unlikely that an Adjudicator will set aside a 90-day notice at all if it is deemed to be a valid notice.

So really for an extra 28 – 42 days in the property you put your future renting prospects at risk, you face a potential $1,000 fine and you face the harsh reality of Tenancy Tribunal.

A handful of people also believe that staying on past the tenancy and appearing at Tribunal with a variety of claims against the landlord, such as allegations of the landlord breaching Section 45 (Landlord’s responsibilities), will result in the Adjudicator setting aside the 90-day notice. Guess what, this is false! In fact, if your landlord has done nothing wrong and you act in a malicious or vindictive matter, it can actually backfire on you.

Let’s not forget that if you give false evidence in the Tenancy Tribunal (also more commonly known as “perjury” in pop culture) you could be held liable for imprisonment not exceeding 3 years (see Section 111 of the RTA).

The lesson from this story is simple… if you are given either a 90-day or 42-day notice – accept it, search for alternative means of accommodation and abide by the notice. It is not worth ruining your future renting prospects for an additional 28 – 42 days of illegal occupation.

Property management - consistently changing

21 November 2019

If the Government isn’t changing legislation, District Court, High Court and Court of Appeal decisions are setting precedent for interpretation of that legislation.

It’s undeniably more important now more than ever to enlist the services of a professional, experienced and knowledgeable team to manage your investment portfolio.

It’s the job of the people within these teams to know all the ins and outs of the Residential Tenancies Act 1986 and provide landlords and tenants with sound advice. The job of the Property Manager is fast evolving… Years ago it involved finding tenants, screening them, putting them in and then dealing with them until they leave. Nowadays you’re doing all that as well as ensuring properties meet the requirements under the Health and Safety at Work Act 2015, the Building Act, Healthy Homes, the Residential Tenancies Act 1986 even some aspects of the Property Law Act have profound impact on property management.

In addition to all of this, a competent Property Manager will be working with landlords to come up with a sound financial plan and budgeting all aspects of the investment property; thus not just protecting the client, but helping the client to grow a larger portfolio and in turn, a larger return on investment.

I’m not taking this opportunity with all the new changes to say: “get your house managed by a Property Manager now!”. On the contrary, take your time in between now and the proposed introduction of yet more RTA changes and find the right team for you. Find the team that does all of the above and more!

It’d be arrogant of me to say that’s our team, because obviously my opinion is always going to be bias. What I can tell you is that we guarantee a certain level of service and if that level isn’t met – you can bet that we’ll come to the party. We’ll help you to budget for maintenance and work with you; however, we will also advise you and point out when something is wrong – that’s what you pay us to do.

It’s a possibility that you’ll be interested in our services, you’re welcome to contact us and request an appraisal, landlord information booklet and listing presentation – they all come at no cost.

Regardless of whether it’s with us or not – get an expert, don’t gamble your investment, don’t risk it all. The climate in this industry is rapidly changing and you don’t want to be caught up in the floods that are coming!