More Properties Managed by Fewer Companies
The Government has finally released the draft Residential Property Managers Bill, meaning regulation of our industry is a step closer.
For many of us who have campaigned for this since 2008, when property management was left out of the Real Estate Agents Act (REAA), it is a moment to saviour. Many of us will feel vindicated for the years of hard work.
The benefits of this move far outweigh any added cost that this will have on our industry, which has a ridiculously low bar of entry. Currently, anybody can claim to be a professional property manager without any training, background checks or qualification.
The result of property management being left out of the REAA back in 2008 is that we have seen a massive increase in the number of companies that offer property management as a service. Before then, it was largely done by companies that were members of the Real Estate Institute of New Zealand (REINZ).
The regulation will introduce a licencing and disciplinary regime similar to the real estate industry. The REA will become the regulatory authority, which is good. Property Managers work within the real estate industry. There is no logic in forming an entirely new body to govern Property Managers as this would be a costly and unnecessary exercise.
There is also likely a crossover between real estate and property management when there are disputes, so keeping everything under one roof makes sense.
The REA need to establish clear guidelines around complaints. Most complaints should come from owners rather than tenants, as the Tenancy Tribunal is the correct space to resolve such disputes. The volume of unjustified complaints that the REA may receive is a potential issue.
Sometimes, owners get frustrated with Property Managers when they are simply trying to do their job and abide by the Residential Tenancies Act (RTA). Owners have a different knowledge of the RTA, and some complaints that the REA may receive should not see the light of day. This will be a process that will evolve once regulation comes into effect.
Many companies won't be set up for regulation and will have to undergo extensive reforms to ensure that they comply. Under the Bill, a Residential Property Management Organization (RPMO) will have to operate using a Trust Account to hold clients' money, and those accounts are subject to an annual audit.
This is an important requirement to protect the client's money. However, many companies do not operate Trust Accounts, and they do not undertake audits.
As such, many smaller companies may take this as an opportunity to exit the industry and sell to RPMOs who are already set up for regulation and have a critical mass of properties. This will lead to more properties being professionally managed by fewer companies.
This does not mean we will see boutique and small property management companies disappear; many will thrive under a regulatory system. There are, however, too many small operators in a saturated market, with many struggling to profit. This leads to shortcuts and poor practices.
A consolidated industry is better as we see companies being able to provide more support and training to the teams, which should lead to a higher, consistent level of service that has been lacking in our industry for so long.
It would be good to see a landlord register to better understand the use of residential dwellings in New Zealand.
We are told that there are over 600,000 rental properties in New Zealand, yet there are only just over 400,000 bonds lodged with Tenancy Services. Where are the 200,000 properties currently rented out which have no bonds lodged?
The Bill states that approximately 42% of properties are currently managed by an RPMO. In my opinion, this is pure speculation. A landlord register would make it easier to police non-compliant landlords, and we would have sufficient data to make more informed decisions.