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The dangers of DIY landlording

Property Management Landlords

Property Brokers 27 Mar 2018

Blog-05-The-dangers-of-DIY-landlording-726x504.pngThere’s no doubt that do-it-yourself landlording is popular. There are 130,000 landlords in New Zealand and, according to BRANZ, nearly two-thirds manage their own properties.

However, managing a rental property is a time-consuming job and it often requires a lot more input than many initially realise. In these situations, it’s easy to let some of the necessary elements of the job slide—and that can open up a whole new can of worms.

 


 

Not managing the paperwork 

Self-managing a rental requires a lot of paperwork. Too often we see private landlords appear to be on top of it all—up until we get a glimpse of their record keeping. Poor record keeping can land a landlord in a lot of strife, especially if it’s needed as evidence at a tenancy tribunal.

Even the act of not giving rent receipts can incur fines of $200—and that’s just the start. In some situations, having poor records can void an insurance claim, as we explain in our next point.

 


 

Not reading the fine print 

Landlord insurance is an essential part of managing your own rental. However, not all landlords read the fine print, which can lead to gaps in their insurance or voiding their cover entirely.

As a guide, landlords need to make sure their landlord insurance covers:

  • Tenant related damage.
  • Loss of rent.
  • Meth contamination.
  • Whiteware cover.
  • Theft.

Note: some of these may require extensions or add-ons to your insurance policy.

 

Some of the most common ways landlords void their insurance are:

  • Having the wrong insurance policy.
  • Not screening tenants to the provider’s standards.
  • Not conducting meth testing between tenancies.
  • Not conducting regular inspections.
  • Having unconsented building works.
  • Not disclosing important information about the property (e.g. meth contamination).
  • Neglecting maintenance.
  • Poor record keeping—if you make a claim you need to prove the incident happened!

A note about malicious damage

Most landlord insurance policies don’t cover malicious (intentional) damage done to a property by a tenant. It is a bit of a grey area in landlord insurance, and can cause a lot of headaches, particularly when insurance companies call into question whether property damage is accidental or malicious.

Important note: The 2016 revisions to the Residential Tenancies Act now mean landlords cannot recover the loss of rent from accidental damage from the tenant. However, loss of rent is now covered by landlord insurance.

 

Straining the landlord-tenant relationship 

If you’re self-managing a rental, chances are you’ll need to deal with your tenants on a personal basis. For some, it works well, however, it’s an area where many landlords struggle—especially when it comes to balancing the property’s needs against the tenant’s, and your own.

Your rental is a business, but it doesn’t run from nine to five. As a landlord, you’re the first port-of-call if something goes wrong with the property—whether it’s at 3pm or 3am. And there’s always the potential minefield to navigate when you want to increase your rent in line with the market rate.

Moreover, you might own the property, but that doesn’t give you unlimited access to it. Unlawfully entering the property or interfering with the privacy of a tenant can result in significant fines.

In one case, a landlord’s case against his tenant was flipped on its head when it was revealed that the landlord’s constant unconsented visits to the property amounted to harassment of the tenant. He was ordered to pay exemplary damages to the tenant.

 


 

(Mis)managing the property 

There are a number of ways to mismanage a rental property, from unlawful discrimination to failing to return a tenant’s bond after four weeks. Many of these instances incur a fine and the sum often ranges between $1,000 to $4,000. Here are a few of the most common ways:


Not maintaining the property

Your obligation as a landlord is to provide a safe and healthy home for your tenants. In doing so, you are not only providing quality housing for your tenants, but also increasing the equity you have for any future investments, as well as maintaining the property’s value if you choose to sell.

The problem is that not all landlords see it that way. Neglecting your maintenance responsibilities can not only void your landlord insurance, but also incur significant fines from the Tenancy Tribunal if your property is not in a reasonable state of repair.

Stories such as this Christchurch landlord, who was fined $4000 for renting out a mouldy home, are sadly common, and serves as a cautionary tale to landlords to stay on top of their property maintenance.

 

Letting a non-compliant property 

Renting out non-compliant properties is a sure-fire way to earn a hefty legal bill. As part of the government drive to create safe, dry and warm homes, a new Tenancy Compliance and Investigations Team has recently formed to crackdown on landlords who breach basic housing standards. What’s more, non-compliant properties are at top of their list.

Recently, one Manurewa landlord was ordered to pay over $16,000 for renting out an unconsented garage to a family. Meanwhile, in Waitakere, another landlord was fined $49,000 for allowing four of his rental properties to house more people than what was safe or sanitary, and for failing to have proper fire escapes.

 

Failing to carry out inspections 

Regular inspections are critical to protecting your investment. For a start, they help to protect landlords and tenants alike from long drawn out “he said, she said” battles over property damage and outstanding repairs.

More importantly, regular inspection gives a landlord the opportunity to spot small maintenance issues before they become big ones. A small crack in a pipe or leaky dishwasher is a fairly small maintenance job. However, if left unchecked, it could turn into a major case of rot and involve significant repair costs.

 

Not testing for P between tenancies

“P” or methamphetamine poses a serious health risk to both tenants and your investment. If you rent out a contaminated property—knowingly or not—you could wind up re-paying the rent to your tenant, plus damages.

In Tuakau, a landlord was ordered to pay back $7,500 to his tenant after he unknowingly rented out a recently purchased property that was meth contaminated. The story serves to highlight the importance of P testing between tenancies, and while not all landlords will know how to spot the signs of meth contamination, a professional property manager will.


Read more: Fines and penalties for incorrect management


 

Struggling? Get professional help

If you’re struggling to keep on top of your landlord duties, enlist the help of a professional property manager. From tenant screening to property maintenance, inspections and record keeping, they can handle the tedious day to day jobs and let you focus on the bigger picture. What’s more, they also have access to a greater pool of resources to do the job efficiently and with minimal fuss.

If you’re interested in getting professional help, we recommend starting with a rent appraisal. This no obligation meeting can help you uncover new ways to make the most of your investment and improve the day-to-day running of your property.

 

Want to maximise the return on your rental? Uncover some of our best renovation advice on the market in our new eBook: Renovating for Maximum Rental Return.

 

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