Wellington Propertyscouts

Propertyscouts NZ monthly newsletter - 1 August 2018 - 1st Aug 2018

Propertyscouts NZ monthly newsletter – 1 August 2018

Providing heating in rental properties compulsory:  Up until recently it was considered sufficient that the living area in a rental property had a power socket which allowed a tenant to plug a heater into.  Unfortunately, it seems that is not the case if a recent Tenancy Tribunal decision is any indication. The property involved in the Tenancy Tribunal case had no form of heating, but it did have electrical sockets in the living area which could be used to plug in a heater.  The Tribunal adjudicator found that this was not sufficient and that the landlord had to supply some sort of heater which could be plugged into the electrical outlet.  The type of heater required was not stipulated by the adjudicator, but it seems that this will now be the stance taken for all similar matters heard by the Tribunal.  To avoid having costs awarded against them, landlords with rental properties which have no form of heating will have to provide a heater of some kind.  Our advice to landlords in this situation is to take advantage of the endless Briscoe’s sales and purchase a cheap, safe to use heater which can be included on the tenancy agreement chattels. An even better option is to install a heat pump. We find that tenants are regularly asking about the presence of insulation and a heat pump before even considering viewing a property.

Market updateLast month we reported that pressure was building on various property fronts, from population growth, the attraction of high rental yields, low interest rates and local gross domestic product growth.  According to an article in ‘interest.co.nz’ the fundamentals for residential property investment are slowly improving as rents rise and house prices ease.  Gross rental yields increased in 25 of 56 locations throughout NZ.  According to the article, the latest figures suggest the residential investment market is continuing to turn slowly, with capital gains drying up and rental returns becoming more important for investors.  At the coal face we are seeing a shortage of rental properties right across the country.  This is leading to strong tenant demand at a time of year when historically the market is normally quiet.      

The ‘bite’ in the bright-line test:  On 29 March 2018 the bright-line test applying to profits gained following the sale of a rental property was extended from two to five years.  An IRD assessment of the voluntary compliance with the bright-line test from its inception in 2015 revealed less than 50% compliance.  Not surprisingly, the IRD take a dim view on tax avoidance and a spokesperson was recently quoted as saying that IRD would take every action available against people who deliberately avoid their tax obligations.

Tenancy Services scam:   Some landlords have been the subject of a scam where they have received an ‘automated phone call’ purporting to have come from the Government agency – Tenancy Services.  Tenancy Services don’t make any automated calls so if you receive a call such as this, hang up straight away.  Scams are unfortunately just a part of life these days.  It pays to be vigilant and suspicious of any calls you haven’t instigated.

Insulation:  Tick tock, tick tock.  As we get closer to 1 July 2019 when it becomes compulsory for ALL rental properties to be insulated we are starting to draw up contingencies for properties that either haven’t been insulated, or where we don’t have the required insulation information.  In situations where these properties become available for rent between now and then we will only be able to ‘fix’ a tenancy up until 1 July 2019.  Beyond that date it will be an unlawful act to rent a property that is not insulated. There was an article just the other day which suggests the $4000 fine for not having compliant insulation would go to the tenant (after they dob the landlord in that is). https://www.stuff.co.nz/business/money/105787069/tenants-of-slack-landlords-one-year-away-from-free-4000
FAQ:  Do tenants have to notify landlords of maintenance they become aware of at their rental property?  The answer to this question is yes.  Where it can be shown that the tenants delayed or didn’t advise the landlord of an issue which resulted in additional damage to the property the tenants may be liable for the additional damage. 

Next month end disbursement date:  Monday 3 September 2018.  

Disclaimer:  Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith.  We suggest that in all cases independent legal and financial advice is sought. 

Propertyscouts NZ Monthly Newsletter – July 2018 - 2nd Jul 2018

Methamphetamine update:  Unless you haven’t heard (but you must have by now…) the Government have announced that we’ve all been overreacting to methamphetamine (meth) contamination in rental properties.  Apparently a bit of meth contamination does us no harm at all according to the Government’s now retired head scientist, Sir Peter Gluckman.  But unfortunately, before this determination, various meth testing and meth decontamination companies have got rich quick from this merry go round. The REAA and Housing NZ have already adopted the 15 mg/100 cm2 ‘safe’ level released in the Gluckman report (previously 1.5 mg/100cm2 and 0.5 mg before that) and it seems that Tenancy Services will follow suit shortly.
The real shame out of all of this is not only the cost to landlords for all the unnecessary testing and decontamination but it seems now that meth users across the country somehow see themselves as being vindicated and the innocent party in all this. There’s been numerous stories recently of tenants unfairly kicked out of their Housing NZ homes for meth levels that are now ‘O.K’. But hang on, they or their friends or family were still doing an illegal act in a rental property, something that can justify an immediate termination of a tenancy. Rest assured, Propertyscouts will continue to screen properties and vet tenants to minimize the risk to our landlords.

What is Wealth?  According to a recent article, wealth can be defined as “owning assets that produce income”.  The author of the article went on to describe the 8 characteristics of desirable assets that produce income as being?

  1. Produces stable, predictable cash flow
  2. Resistant to market cycles
  3. Tax-advantaged
  4. Able to be safely leveraged
  5. In perpetual demand and not dethroned by the latest technological innovation, the mood on Wall Street, or a war in the Middle East
  6. Doesn’t decline in value (may not skyrocket, but at least keeps up with inflation)
  7. Low hassle. Generates income largely on its own
  8. Can be passed along to the next generation
Looks like they were describing rental property ownership.  Not that we needed any convincing!

Rental Market update:    There is a real shortage right across the country for good quality rental properties and here at Propertyscouts we need more properties to meet tenant demand.  If you know of anyone with a rental property, we’ll give you 3 months free property management on your own rental property if we are fortunate enough to pick up the management. 

Mortgage Brokers: Speaking of rental properties, we know a few really good mortgage brokers who can help you refinance and best of all save you money. So what do they do? Well a broker does exactly that, they are the middleman between the borrower and the bank or rather various lenders. In NZ all mortgage brokers are regulated by the Financial Markets Authority. Mortgage brokers will usually have affiliations with a number of mortgage providers i.e. financial institutions like banks, Credit Unions and second tier lenders. This means you can get them to do the leg work for you and best of all it’s free to the borrower. The important thing to remember is that people often just go to their bank which automatically limits you to their pricing and deals. With a broker they will match you to the best lender for your needs and situation.
Please get in touch if you would like some more details about our brokers.

Maintenance:  Thank you to all of those landlords across NZ who responded positively to our recent mailout dealing specifically with rental property maintenance.  It was a timely update on the responsibilities of landlords and us as property managers when it comes to carrying out maintenance on rental properties. 

Insulation:  The clock’s ticking folks.  Have your rental property insulated before 1 July 2019 or face the possibility of a $4000 fine.   

FAQ:  Lawns and gardens.  Who’s responsible – the tenant or the landlord? Tenants are responsible for keeping lawns and gardens reasonably tidy, unless the landlord has agreed to do this.  If the tenant wishes to prune or cut back any trees or shrubs they should first get the landlords permission and the tenant will then be responsible for removing the cuttings.  Landlords are responsible for pruning and maintaining trees, shrubs and hedges and they must remove any cuttings.  Landlords must also ensure that any trees, shrubs and hedges on the property are safe – for example they have not been damaged by storms or aren’t growing too close to power lines.   

Disclaimer:  Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith.  We suggest that in all cases independent legal and financial advice is sought. 

Status quo remains at Tenancy Tribunal post-Gluckman report - 27th Jun 2018

The Tenancy Tribunal has published its first orders on methamphetamine since the Gluckman report sent shockwaves through New Zealand last month.

In a nutshell the Tenancy Tribunal is sticking with the current contamination standards of 1.5mg per 100 cm square. However,  Housing New Zealand and the Real Estate Agents Authority quickly established new contamination levels of 15 micrograms/100cm2 for their businesses.

So far, only one Tenancy Tribunal order, application number 4128761, referenced the Gluckman report.

“There is currently some debate about the health impact of methamphetamine however I agree that the use of premises for an unlawful purpose is something to be discouraged,” the adjudicator wrote.

So it appears it’s business as usual for landlords and property managers until any legislative changes are made in this space.

Tenancy.co.nz managing director Craeg Williams said “If Housing New Zealand and the Real Estate Agents Authority have established a level of 15 micrograms/100cm2, we believe there is no reason why the Tenancy Tribunal shouldn’t follow suit". “Tenancy.co.nz intend to lobby to the government to make this change happen as soon as possible.”

For full article - http://www.tenancy.co.nz/status-quo-remains-at-tenancy-tribunal-post-gluckman-report/

Major retailers pull ionisation smoke alarms following report - 20th Jun 2018

PlaceMakers and Bunnings Warehouse said they would sell through their stock and then discontinue selling it.

Consumer NZ head of testing Paul Smith said the DIY retailers removing the product was "a major win" for consumers.

Smith said the alarms posed a risk as smouldering fire could fill a home with deadly smoke long before it burst into flames.

Ionisation alarms can be identified by a radioactive symbol at places on the alarm case.

Consumer NZ recommended installing photoelectric models instead.

For full Stuff article - https://www.stuff.co.nz/business/104823729/major-retailers-pull-ionisation-smoke-alarms-following-report


June Newsletter - 1st Jun 2018

1 June 2018 - Propertyscouts monthly Newsletter
Is your rental property a healthy home to live in:  Lets face it, if we asked a tenant that question and then the landlord the same question, not surprisingly, we’d likely get two different answers.  Most of our landlords are doing all that they can to ensure that their investment properties are warm and dry. Over the years we’ve seen some appalling rental properties, and yes there’s been a few that we haven’t been prepared to manage.  We’ve said it before and apologies for sounding like a broken record but warm, dry, well maintained rental properties attract better tenants who will stay longer and pay more rent.  Still not convinced?  Well sorry to be the bad news fairies but the present Government are planning on taking some of the decision making around healthy homes out of the hands of Landlords.  The Healthy Homes Guarantee Bill became law in 2017.  As its name suggests the Bill is all about making rental home healthier.  The standards the Bill will focus on have yet to be set (except for insulation) but its expected that the standards will include the likes of:

  • The premises must be able to maintain a minimum inside temperature of (probably) 18 degrees Celsius.
  • The property will have to have adequate heating sources and most likely they will have to be energy efficient. In most instances this will be a heat pump.
  • Ventilation
  • Draught stopping and the prevention of moisture ingress. 
Given a recent survey one Government Department recently carried out which questioned occupants on the level of mould in their property, don’t be surprised to see something about mould and mildew in the Bill as well.
On the bright side, let’s accept the changes for what they are and the overall good they will bring. For a lot of landlords their properties will already comply, so it will just be business as usual.  It’s been a long time coming and as an industry we’ve left the door open for what in some cases has been justified criticism.  The long-term benefits of complying with the likes of the Healthy Homes Bill will be good for the residential rental market, good for tenants and yes it will also be good for landlords.

Tenants liability for damage still unclear:  Previously tenants used to be responsible for any careless damage they caused in their rental property.  Then along came the Osaki case and a High Court ruling that found tenants couldn’t be held responsible for the cost of damage to a rental property where the property was insured, unless the damage caused was shown to be intentional.  Responding to concerns from Landlords, the previous National Government introduced a Bill into Parliament that would have resulted in changes around this issue and benefited Landlords.  A Select Committee has now reported back on the Bill and proposed changes that seem to complicate the situation even more.  The wording of the original Bill was that where a tenant damaged a property which was insured against damage then the tenant’s responsibility would be limited to either the applicable (insurance) excess or four weeks rent – whichever is lowest.  But the Select Committee wants the words “for each incident” to be removed.  It seems from this that any amount of damage will simply be treated as one incident of damage, thereby limiting a Landlords ability to recover costs from tenants.  As the old saying goes – “anything is better than nothing” and even in its suggested form the change will be an improvement on the status quo but let’s hope common sense prevails and the original wording of the Bill is adopted rather than the watered down version. 
Q.  As a landlord I know that my rental property must be insulated by 1 July 2019.  What parts of my property have to be insulated by this date? 
A:  All ceiling and underfloor areas that can be accessed must be insulated by 1 July 2019.  Insulating exterior walls is not necessary.  The insulation must meet approved “R’ levels (different for certain parts of the country).  The penalty for non-compliance after 1 July 2019 are up to $4000 in exemplary damages. 

Asbestos update:  Some asbestos removal companies have been advertising that all landlords need an asbestos management plan for every rental property.  Thankfully that is not correct.  Worksafe have issued a policy statement which clarifies a landlord’s responsibilities concerning asbestos in rental properties.  Under the HSWA (Health and Safety at Work Act 2015) all landlords must ensure that work carried out at their property is done safely and without endangering workers or any others, including tenants.  Landlords and Property Managers acting on behalf of Landlords, have a duty to identify asbestos and prepare an asbestos management plan for work which involves, or may involve the risk of exposure to asbestos. 
A full copy of the plain English Worksafe policy can be found here:

Local councils offer insulation subsidies:  As we are sure you are aware; all rental properties, MUST be insulated by 1 July 2019.  Several local councils throughout NZ are offering subsidies and low interest loans (repaid along with rates payments) to assist with the upfront cost of installing insulation.  In some cases, the financial assistance also extends to helping landlords install approved heating.  If you are interested in investigating the possibility of this sort of Council assistance, then please get in touch as there are certain eligibility criteria.   http://www.gw.govt.nz/wellington-region-scheme/

Investment syndicates:  If you are interested in exploring the possibility off joining an investment syndicate of like minded investors to target residential investments in strategic areas around NZ then please get in touch.  We have some very exciting opportunities coming up in the next couple of months. 

Getting the best out of your heatpump during Winter: 
  • Clean filters every 3 weeks
  • The colder the outside temperature the harder the heatpump has to work causing the heatpump to go into ‘defrost’ mode every hour or so.  Decrease the temperature setting to prevent your heatpump from defrosting too often.
  • Use the ‘heat’ setting rather than the ‘auto’ setting on the remote. 
  • Heatpumps heat rooms, not houses.  Trying to heat large areas can sometimes cause the heatpump to work too hard.  This makes them inefficient.
Next Newsletter:  Friday 15 June 2018. 

Disclaimer:  Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith.  We suggest that in all cases independent legal and financial advice is sought. 
Regards from the hard-working team at Propertyscouts   

Wellington tenant ordered to pay back sub-let Airbnb profits to landlord - 22nd May 2018

Wellington tenant ordered to pay back sub-let Airbnb profits to landlord A Wellington tenant has been forced to hand over more than $11,000 of profit after sub-letting an apartment on Airbnb.

Jeff Walter Paterson started renting the Taranaki Street apartment in May last year, and then subleased the property 54 times on Airbnb in violation of his tenancy agreement.

Six months later the owners noticed and contacted him.

When contacted by the owners by email, Mr Paterson did not mention the subletting, and instead said he had moved out because of significant earthquake damage.

The tenancy tribunal has ordered Mr Paterson to pay the owners $11,513.29 for unpaid rent, Airbnb profits and other damages.

For the full article from RNZ News click here 


May Newsletter - 1st May 2018

1 May 2018 - monthly newsletter
Dear landlords, we hope you are settling into the shorter days (if you are in NZ that is) and the early stages of winter aren’t too bad where you are. This month’s newsletter is a little dreary (we’re sorry but blame the Beehive) so we apologise in advance. To make up for it, we’ve included a joke at the end of the newsletter for those who are still reading by that point…

Expert Opinion: If you hadn’t already noticed, the current NZ rental/property market is a really hot topic at the moment. Ashely Church, the CEO of the Property Institute, provides a lot of good and reasoned insight on the property market during his increasingly more frequent appearances on TVNZ’s Breakfast Show. If you are interested, there a number of his TVNZ interviews on You Tube. They are worth a watch!

If the residential rental market were the stock market:  Then market commentators would say that we were in the middle of a ‘bear market’.  The term ‘bear market’ is used to describe the stock market when stock values are falling and the overriding feeling is one of pessimism.  While property values seem to be holding their own, there certainly does appear to be an ‘air’ of negativity amongst landlords.  And it’s not hard to identify the source of the angst. 

The present Governments proposed changes around the Residential Tenancies Act and other legislative changes will negatively impact landlords by increasing their costs. Private landlords remain the biggest providers of residential rental properties in this country and it seems incredibly short sighted to negatively target the largest provider in such an important sector (just ask Ashley Church).  With around half of all Kiwis now living in rental accommodation, the backlash, if the Government doesn’t get things right could be exponential.  Industry experts have for some time been saying that the over-riding effect will be an increase in rents.  According to NZPIF and our own analysis, rental price increases are set to continue as landlords continue to try to off-set their increasing costs. 

Buy, sell or hold:  Last month we talked about the options for investors in this sort of market.  Given that we’ve compared our present residential market to the stock market we thought that we would leave it to arguably the World’s foremost share market commentator and investor, Warren Buffet who made the following (now) famous quote when asked about his share buying strategy.  Buffet said “Be fearful when others are greedy and be greedy when others are fearful”. 

Twyford introduces Bill to end Property Managers from charging tenants a letting fee:   It’s very common practice for Property Management companies to charge tenants a letting fee at the beginning of a tenancy.  The fee is normally equivalent to one weeks’ rent and helps property managers off-set the costs involved with setting up and commencing a new tenancy. There is a perception by a lot of folk that the letting fee is like a bonus to letting agents in addition to the management fee we collect. I’m sure some of you have let your own properties before and know how difficult this can be.

The process from advertising the property to dealing with enquiries, hosting viewings and doing sufficient checks on the tenants to ensure they will be good tenants can be very time consuming. What’s more, we find that a lot of potential tenants feel no responsibility in keeping an appointment to view a property. Often we will travel long distances during the day and night only to be stood up by our potential tenant. Even when we have a set viewing time, if 10 groups book for the viewing we will be lucky if 3 or 4 groups actually turn up, particularly if it happens to be raining or it’s got a bit cold. What’s more, when processing an application we can spend a day calling references and doing checks only to find the group have found another place they prefer and forgot to tell us.

Before we get the violins out, we will stop there. I think you get our point that a letting fee is and soon to be was an important part of our income but one we work very hard for. Propertyscouts, as with all other management companies, will just have to adjust, it will be interesting how the industry as a whole will deal with this change. We were hopeful that they may just cap the letting fee, a weeks’ rent up to a maximum of $400 or so.  

According to Mr Twyford, there is no justification for landlords passing this cost on to tenants and banning the charging of tenant letting fees will help make rent more affordable which will in turn help tenants save to buy their own home.  We can’t see how a one off fee of around $450 on average for a tenancy that can last for years is going to significantly help a tenant buy their first home.

And in breaking news - it was recently reported that Mr Twyford accepted that abolishing letting fees was likely to result in rents increasing but justified this by saying that the letting fee is charged to tenants at a time when they have to find up to four weeks bond and two weeks for rent in advance.  As rents invariably increase (which they will) the property management industry and landlords will likely take the blame.  More violins please…

Insulation:  2019 is just around the corner folks so you have just over 12 months to have your rental properties  insulated to meet the new Government standards (if they aren’t already).  Any property that is not sufficiently insulated will not able to be lawfully rented after June 2019. 

Q.  As a landlord how much notice do I have to give to the tenant if I want to visit the property? 

A:  This question follows on from last months FAQ which dealt with giving tenants 48 hours’ notice of an inspection and 24 hours’ notice to carry out repairs and maintenance.  In some ways it’s a bit of a ‘trick’ question because the simple answer is that you don’t have to give the tenants any notice if you merely want to enter onto the property.  For example you want to speak in person with the tenant.  However if the tenant requests that you leave then you must do so immediately.  Please don’t get confused.  We are referring here to the likes of visiting the property and knocking on the door.  We are not talking about entering the premises. 

Joke: How many ants do you need to rent out an apartment?                    Tenants!

Disclaimer:  Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith.  We suggest that in all cases independent legal and financial advice is sought. 

Regards from the team at Propertyscouts   

April Newsletter - 3rd Apr 2018

3 April 2018 – Propertyscouts Monthly Newsletter 
Easter:  We hope that you had a happy and enjoyable Easter. Barring Christmas it’s the only other time of year where we can all eat far too much chocolate (and hot cross buns) and get away with it.  By the way, your next public holiday is already on the horizon, ANZAC day is on the 25th of April, a Wednesday folks. The next long weekend is 4 June, Queen’s Birthday weekend. Then we have the 6 month drought until the next long weekend, labour weekend in October… 

Landlord costs increasing:  There seems to be little doubt that this year will see increased costs for landlords.  The likes of the Governments Healthy Homes Guarantee Act (which will introduce minimum standards for rental properties), and also their plans to ring-fence rental property losses together with the likelihood of increased management costs from tenancy law reform all have the potential to have a negative impact for investors.  At the same time all of this is happening, rates and insurance costs are on the increase.  However, while the proposed Government changes are a worry to some in the industry, for most investors, interest rates are the bigger cost concern rather than regulatory costs.  In a recent media article, a prominent Auckland property investor, David Whitburn, put it all in perspective when he said that the increased costs can be factored in and compensated for by rent increases.  Whitburn went on to say that while the regulatory changes may be getting to people they shouldn’t be the ‘straw that breaks the camel’s back’.   He also added that industry changes are leading to a trend away from self-management and towards professional property management in a bid to stay on top of compliance requirements and costs. We agree with Whitburn and his view backs up our long-held contention that the days of DIY property management are a thing of the past. 

Has there ever been a better time to invest in property?  The answer to this isn’t as simple as it was perhaps this time last year.  However, there are still good opportunities out there for astute investors, especially if they adhere to time-proven strategies such as:

  1. Try to buy under rented properties (invariably these will be privately managed properties) and get the rent up to market rent ASAP.  This adds value to the property immediately.
  2. Add value to the property to increase the weekly rent.  An example of adding value might be adding a heat pump or insulation.   
  3. Be patient and buy well.  A good way of ensuring that you buy well is staying in touch with your Property Manager so they can put you in touch with property investors wanting to sell.  Often this will mean no real estate agents, and you know what that means – no real estate commission included in the price.
  4. Know your market. Trade Me and Realestate.co.nz are great for this.  Just load your particular search criteria’s and let their software do the work for you. 
  5. Persistence pays off.  Don’t give up.  Once you have decided on the type of property you want to buy and your budget, stick with it.  Persistence almost always pays off.   
When is the best time to sell my rental?  As the old saying goes “if you can rent it then don’t sell it”.  Speak to any avid investor and they’ll all tell you about the properties they have sold and then gone on to regret the sale.    If you have to sell your investment property, then please get in touch with us first and we may be able to put you in touch with an investor looking to buy.  

Real Estate companies waking up to conflicts of interest:  We’ve been concerned for a long time now with real estate companies using their own in-house property managers for rental appraisals of properties for sale.  There is a clear conflict of interest when they do this in our view.  We have heard of one company that no longer allows its agents to use the company’s property management arm for rental appraisals.  So good on that company we say.  By doing this they will invariably decrease the number of new property owners stung by purchasing a rental property on the basis of an in-house rental appraisal that the property is unable to achieve. 

Q.  How much notice does a landlord have to give a tenant of a routine inspection? 
A:  48 hours’ notice is required before a routine inspection and 24 hours’ notice for access to carry out any repairs or maintenance.  We often have problems with real estate agents thinking the same applies to them for viewings at a tenanted property.  That’s not the case.  For viewings with the likes of real estate agents or for viewings for potential tenants the ‘sitting’ tenant must agree to the viewing.  They are not able to unreasonably withhold their consent but what is and isn’t ‘reasonable’ can often be problematic and needs to be worked through carefully

Heat pump and fire servicing reminder:  It’s hard to believe that it’s time to start organising heat pump services and fire cleans in preparation for winter.  For safety reasons it’s important that fires are cleaned yearly.  Heat pumps should be serviced at least every two years.  We will be starting these over the next few weeks. We will send out a separate email shortly to all our landlords with heat pumps and/or fires in their properties with some more information on our plans and pricing.

Disclaimer:  Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith.  We suggest that in all cases independent legal and financial advice is sought. 

Regards from the team at Propertyscouts. 

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