Prices continue to hold up around the country with the median price for residential homes reaching a national record of $562,000 in October – a 6.0% increase on the same time last year. Similarly, New Zealand excluding Auckland experienced a record median price of $479,250 an 8.9% increase since October 2017.

The median price in Auckland increased by 1.8% year-on-year to $865,000 – this is the highest median price for the region in 7 months. Additionally, 5 regions achieved a record median price during October:

Manawatu/Wanganui: +20.2% to $344,000 (up from $286,250 at the same time last year)

Otago: +18.2% to $480,000 (up from $406,000 at the same time last year)

Hawke’s Bay: +17.4% to $464,123 (up from $395,500 at the same time last year)

Taranaki: +8.6% to $380,000 (up from $350,000 at the same time last year)

Canterbury: +3.3% to $465,000 (up from $450,000 at the same time last year).

Facts

The Landlord sought costs, which included the insurance excess for meth decontamination work, from the Tenant. The Landlord had not done a pre-tenancy meth test. The tenancy was terminated by a 90-day notice and, a few weeks after termination, the Police found substances at the premises which were considered to be meth and equipment which were associated with meth use. The Landlord tested the premises for meth and the results ranged between 0.47ug/100cm2 to 15.89ug/100cm2.

The Landlord’s insurer paid for the total remediation costs, but the Landlord had to pay an excess of $2,500. He claimed against the Tenant for the excess. The Tenant cited recent media comments about meth testing, which due to the timing of the decision, likely referred to the report by the Prime Minister’s Chief Science Advisor Sir Peter Gluckman. Sir Gluckman’s report indicated there is little evidence supporting health risks from exposure to residues from meth use, and that any levels below 15ug/100cm2 were unlikely to present adverse health effects

Details

The Landlord was successful in claiming the insurance excess from the Tenant.

Although there was no pre-tenancy meth test, there was sufficient evidence for the Tribunal to conclude the meth contamination occurred during the tenancy. The collective evidence was that the Tenant herself admitted her son had a substance issue with meth use, and the Police report showed there was meth use during the tenancy.

The Tribunal then considered whether the Tenant was responsible for the insurance excess. Tenants are generally not liable for careless damage if the landlord is insured, although they would be liable for intentional damage or actions “that constitute an imprisonable offence” – section 269 of the Property Law Act. The Tribunal noted meth use would fall under either one or both of these categories.

The Tribunal was also asked to consider what the current situation is, given the Gluckman report. It confirmed that any consideration as to whether the premises were contaminated, must be based on the prevailing guidelines at the time. The Tenant was found liable as the testing and remediation work in this case occurred when the NZ Standard remediation level of 1.5ug/100cm2 applied. Even if the level to be applied was as per the Gluckman report, the Tribunal noted the Tenant would still be liable as the reported level in some areas was over 15ug/100cm2.

Taking a pet-friendly approach to rental property can deliver significant benefits to landlords - if done properly, according to one property management company.

While 67% of New Zealanders own pets, just 13% to 14% of landlords allow tenants in their rental properties to own pets.

But a decline in home ownership means more New Zealanders are renting - and many of them have pets but struggle to find rental properties that will accept them.

There is now a growing movement in support of pet-friendly rentals and the new government recently announced that Housing NZ’s pet policy is set to become more accommodating.

Despite this, many landlords remain concerned about the risks (specifically damage and the related costs) of offering pet-friendly rentals.

But allowing pets in rentals doesn’t have to lead to problems and, in fact, it can have the reverse effect.

Ark Property Management’s Grace Gray says that tenants with pets are often willing to pay more to secure a home.

Some studies show that tenants with pets pay an average of 15% more rent per week and stay for around nine months longer, she says.

One example is recent Barfoot & Thompson data which shows that, in the year ending August 2017, new rentals which allowed pets received an additional $54.46 per week on average.

Gray says that for a landlord this means allowing pets in their rentals can result in a significantly higher return on investment, both through the higher weekly return and through reduced periods of vacancies.

However, she understands that some landlords have had negative experiences due to having pets in a rental property while other landlords have concerns about the perceived risks that come with pets.

This has led to a situation whereby landlords tend to take a blanket “no pets” approach, even though there is high demand for rental properties from tenants who are responsible pet owners.

For this reason, Ark Property Management has developed a special “pet programme” for landlords who use their services.

A major component of the programme is their “pet CV” which robustly vets the suitability of every tenant’s pet(s) via a system including references, certificates, vaccination and registration checks.

Gray says this means that not only are potential tenants thoroughly checked out but so too are their pets.

The programme also includes two extra pet property inspections annually and an annual commercial carpet clean for no additional cost.

Gray says their programme aims to minimise the risks to landlords, as well as opening up their investments to higher returns, longer tenancies and a larger pool of tenants.

A survey of 816 rental property owners shows that 49% would like their tenants to stay in the property for a very long time as they have no intention of selling. Another 12.7% would like them to stay for at least the next 10 years after which they may start thinking about selling the property.

The results indicate that a majority of rental property owners can offer security of tenure for tenants who value this. The NZ Property Investors' Federation (NZPIF) advices prospective tenants, who would value a long term tenancy, to ask the owner if they have any plans to sell so they can identify the owners who want long term tenants.

The result also shows that a majority of rental property owners may be willing to enter into a more formal arrangement that further protects a tenant’s security.

After the election, the NZPIF would welcome discussions with all political parties and tenant groups. We would like to see if we can come up with a balanced solution that provides better security for those tenants that want it, without taking away the rights of the owner or disadvantaging them in the process.

"There is potentially an increasing number of tenants who want better security in their rental properties" says NZPIF Executive Officer, Andrew King "This survey result shows that a majority of landlords want this as well, so I'm sure there must be a solution that will meet everyone's needs."

Another survey result showed that 77% of respondents would be very or extremely concerned if the 90 day notice to end a tenancy without cause was removed.

Only 43% of rental property owner respondents had ever issued a 90 day notice, and of those, 64% had only issued one in the last five years.

At 33%, the main reason for issuing a 90 day notice to end a tenancy was because of tenants disturbing their neighbours. Landlords have an obligation under the Residential Tenancies Act to protect the peace, privacy and comfort of their neighbours. Other tenants and neighbours are often reluctant to put their concerns in writing, so owners do not have any evidence to present to the Tenancy Tribunal to end the tenancy. A 90 day notice without cause is often the only tool they have to comply with this obligation.

"The survey shows that rental property owners do not use 90 day notices very often and usually it is to protect other tenants and neighbours from the antisocial behaviour of their tenants." says King. "Removing the use of 90 day notices, as Labour is proposing, would protect tenants displaying antisocial behaviour at the expense of others".

On the 27th April 2017 at the Tenancy Tribunal in Dunedin, adjudicator Wilson made a ruling on a case that has sent alarm bells ringing and many think the ruling was grossly unfair. The former tenant Natalie Parry lodged a claim for a refund of rent after she found out that the property she was renting was not fully compliant. The landlord, Vic Inglis was oblivious that there was anything wrong.

The property in question was personal and precious to the landlord. It had been the family home for 10 years. The property was in very good condition and the adjudicator acknowledges that the landlord made no attempt to avert Council laws or to exploit the tenants.

The problem arose when the tenant became aware that the downstairs part of the premises did not have a permit for the work undertaken to convert the space into living quarters.

What made the matter worse for the landlord was that the tenant only became aware of the issue when she sublet the downstairs part of the property without consent from the landlord. Mr Inglis was completely unaware that the downstairs did not have council consent as he had not got a LIM report (Land Information Memorandum) when he purchased the property over a decade ago. This was the only mistake he made but what a costly mistake to make.

In a case that seems grossly unfair, a landlord had rented a property that was in a perfectly good condition to a tenant who had breached her agreement yet not only did she get nearly $11,000 in refunded rent, she pocketed over $3,000 from subletting the property without the consent of the landlord.

Is Tenancy Tribunal Like Playing Russian Roulette?

At Real iQ, we have examined this decision closely and have obtained the case notes. We are aware that Mr Inglis has appealed to the District Court so the decision may yet be overturned. However, we feel it is important to understand how the adjudicator came to this incredible decision and we also again provide evidence that going to Tenancy Tribunal can be like playing Russian Roulette.

Let’s analyse Adjudicator Wilson’s decision.

1. Was the Tenancy Illegal?

This is what Wilson believes. Yes, the downstairs did not have a permit but does that make the entire property illegal?

The section adjudicator Wilson refers to in the Residential Tenancies Act is section 137; Prohibited Transactions. This eludes to the fact that you cannot enter into a contract that contravenes the provisions of the Residential Tenancies Act and that any money paid under the contract is recoverable to the tenant.

2. But was there anything actually wrong with the property?

The answer to that is no. After finding out that the downstairs did not have consent Mr Inglis approached the council and was able to obtain a Certificate of Acceptance which then made the property fully compliant. No additional work was done. Yet Wilson states that the Code of Acceptance does not retrospectively make the tenancy lawful because the consent was not issued until two months after the tenancy ended. Therefore, in the eyes of Wilson, this was an illegal tenancy.

3. The Landlord’s Cross-Application Is Out of Here!

Mr Inglis made a cross-application against the tenant due to damage to chattels and for the removal of smoke alarms which has maximum exemplary damages of $3,000. This was thrown out as the decision that the tenancy was unlawful meant that Tribunal had no jurisdiction to consider any of the landlord’s claims. Basically, the tenant could have been operating a Meth Lab and the landlord had no power to do anything about it.

4. Grounds for a Rehearing? No chance!

Unsurprisingly, the decision did not sit well with Mr Inglis who immediately applied for a rehearing. However, there were no grounds for this. Section 105 of the Residential Tenancies Act refers to Rehearings.

You can only seek a rehearing on the ground that a substantial wrong or miscarriage of justice has or may have occurred. In the opinion of the adjudicator, this has not happened on this occasion. This is a matter for a District Court if the landlord chooses to appeal.

5. Different Adjudicator, Different Ruling

Meanwhile, in Christchurch, a landlord appeared to get off lightly in comparison with Mr Inglis.

The case between Danielle Williamson v Green Gift Health and Wealth Ltd highlights the inconsistencies that plague Tribunal.

On the 31st July 2017, Adjudicator Armstrong chose not to refund rent even though the property that was tenanted had a second bathroom without consent and a wood burner not compliant with the Building Code.

In this case, Ms Williamson took Green Gift Health and Wealth Ltd to Tenancy Tribunal seeking compensation due to the poor condition of the property they had rented and the fact that parts of the property were non-compliant. Adjudicator Armstrong ruled in favour of the tenant yet did not refund any rent.

This makes the Inglis decision seem very unfair as in the Christchurch case, the landlord clearly breached and would have been aware of the poor condition of the property. The property was not only non-compliant but also a health risk to the tenants yet the tenant was ordered to pay rent arrears to the landlord.

Be Consistent and Be Fair

The greatest frustration we hear about from Property Managers is how inconsistent Tribunal can be. In defence to many adjudicators, we have no doubt that many Property Managers attend unprepared and have limited knowledge of the act.

However, our research does show that too often we get inconsistencies. One of our aims is to hold Tribunal accountable to their decision and to educate Property Managers so they are better prepared when attending Tribunal.

The question this case highlights though is how many illegal tenancies are there, and does this give the green flag for tenants to seek thousands of dollars in rent refunds as many rental properties could have similar issues?

Our advice to Property Managers is to ensure that the landlord is fully aware of the obligations to provide the property compliant with all legislation and if you suspect that a property may not be compliant, raise the question with your landlord and highlight this Tribunal case.

Article by Real-IQ

Rising yields suggest the residential property market could be returning to fundamentals, where income becomes more important than capital gain for investors

The residential property market could be at an important turning point for investors as rental yields start to rise.

A rental yield is a standardised way of comparing the potential gross income returns different properties could produce for investors. It is the amount of rent a property could potentially generate in a year expressed as a percentage of its purchase price.

A higher yield suggests a property would provide a better rental return for an investor than one with a lower yield. Until recently, yields have been trending lower as property prices rose faster than rents, reducing the rental returns available to investors.

But that appears to be changing, according to interest.co.nz’s Residential Investment Property Rental Yield Indicator.

The Indicator tracks the REINZ’s lower quartile selling prices for three bedroom houses in 56 locations around the country where there are high levels of rental activity, and matches them with the median rents on newly rented three bedroom houses in the same areas.

This allows it to track changes in the income earning potential of rental properties throughout the country.

The trend has been for yields to fall, as property prices have risen faster than rents, which has led to many investors chasing capital gains ahead of rental income. But that now looks to have changed.

The latest Indicator shows that yields have risen in 27 of the locations monitored, fallen in 16 and were unchanged in 13, based on REINZ lower quartile selling prices and median rents on newly let properties in the six months to September (see table below).

That compares with 20 locations that showed rising yields, 27 that showed falls and nine that were unchanged based on prices and rents for the six months to June. The trend was particularly pronounced in Auckland, where yields rose in six of the suburbs monitored, were unchanged in three but didn’t decline in any of them, and also in Christchurch.

But the indicative yields were also mostly rising or flat in places like the Waikato and Bay of Plenty which have been hot spots for residential property investors over the last couple of years.

That suggests a significant change in conditions for investors, and may mark a return to a market that is driven by fundamentals, where investors focus on long term income returns rather than capital gains.

In most cases the rising yields were driven by increases in rents but often also by falls in lower quartile selling prices. However it is still early days and the indicative yields remain extremely low in most main centres. In Auckland, they remain below 5% in all of the districts monitored and below 4% in half of them.

So the market may have some distance to travel before the returns are attractive enough to encourage a major jump in investor activity in the absence of capital gains. The change also presents some challenges for investors who purchased rental properties several years ago. They are likely to have seen a substantial increase in the capital value of their properties along with steadily increasing rental income. With interest rates remaining at very low levels they would likely be in a very fortunate situation. But if the market has turned, they will need to consider whether the money they have tied up in those investments is now working hard enough for them. They will need to decide whether to hang on to their properties for growth in rental income and flat or possibly declining capital values, or cash up and take the the capital gains and reinvest the money elsewhere.

The outlook for interest rates is likely to be a major factor in whichever way they decide to go.

Article via interest.co.nz

It’s been a long time coming but the much anticipated new meth testing and decontamination standard is finally here – and it's good news for landlords.

Standards New Zealand released the new testing and decontamination meth standard, which covers properties used as meth labs as well as properties where meth has been used, today. The most significant change in the new standard is that a new contamination level of 1.5 micrograms per 100cm2 limit has been set.

Under the old guidelines, the limit was 0.5g micrograms per 100cm2. While the draft standard released in December last year proposed a three level approach to contamination limits, the new standard sticks to a single level approach. But it establishes clear methods for sampling and testing and competency requirements for samplers and decontamination contractors.

This is considered critical given ongoing reports of inconsistent tests and excessive decontamination costs.

The standard will also require accreditation for people carrying out testing for detailed assessments and recognised training courses for testing and decontamination operators Fuelled by regular horror stories about meth contaminated properties, public concern about meth contaminated properties continues to run high.

But Standards New Zealand manager Carmen Mak said the new standard will address concern on the safety of occupants in houses where meth has been detected, as well as providing a benchmark to those in the industry.

“Application of the standard will provide assurance that activities such as screening, sampling, testing, assessing, and decontamination of contaminated properties, and disposal of their contents, are carried out in accordance with good practice.”

The new standard is a huge step forward and will allow New Zealanders to better manage the risks of meth in residential properties, Building and Construction Minister Nick Smith said. “It will give people greater confidence and certainty, will result in hundreds fewer properties having to be vacated and save millions in unnecessary decontamination work.”

Smith added that the new standard is also an important part of the Residential Tenancies Amendment Bill (No 2), which is currently making its way through Parliament.

The bill, which is intended to allow better management of meth contaminated properties, would give landlords the right to test for meth and enable tenancy agreements to be terminated when levels are unsafe.

NZ Property Investors Federation executive officer Andrew King said it is great that meth contamination limits have been increased to more realistic levels in the new standard. He hopes the new levels will help to calm the fear surrounding the spectre of meth contaminated properties, but said that there is still a widespread lack of understanding of the whole issue.

“For many people, including Tenancy Tribunal adjudicators, any level of contamination is toxic. That is not the case. The new 1.5 level is conservative – and it is safe. There are likely to be higher levels on bank notes.”

“But the government should run a public education campaign on the new standard so that people learn how the levels are established and what they mean.”

King, who was a member of the meth standard committee, said the fact that testing accreditation will be required should address concerns about inconsistent tests and cowboy operators.

“The new standard means everyone will know what they have to do and how to do it. It provides greater clarity, more consistency and more reassurance to what has been a confused area.”

In a statement, the Real Estate Institute of New Zealand (REINZ) said that the lack of a national standard has led to scaremongering and mis-information for members of the public around testing and decontamination processes.

“The new standard will give property owners, landlords and property managers more confidence around test results which will help protect the health and safety of occupants.

“It is a big step in the right direction towards gaining certainty around whether a property is contaminated and, if so, how it should be decontaminated.”

The new testing and decontamination of methamphetamine-contaminated properties standard can be read here.

An article via Landlords.co.nz:

The Health and Safety at Work Act 2015 (HSWA) came into force on 4 April 2016. Under these rules, landlords (and their property managers) owe a duty of care to ensure the health and safety of everyone involved with or affected by work undertaken on their property. The HSWA applies to both commercial and residential premises. This article highlights keys to ensuring compliance under the new laws and avoiding harsh penalties.

What duties are owed and to whom?

The HSWA applies to all business activities and rental businesses are no exception. Since landlords and property managers are largely in control of leased premises, they are considered Persons in Charge of a Business or Undertaking (PCBU) and owe duties under the HSWA. Landlords and property managers cannot contract out of their obligations under the HSWA.

Where property managers are employees of a property management business, they are considered workers and the property management business is the PCBU. The Property Manager’s primary responsibility is to ensure the health and safety of those using the leased property for work purposes.

The HSWA also applies to residential rentals but only while it is a place of work (e.g. where tradesmen are engaged and enter the premises to carry out repair work). The rest of the time, rentals are simply homes and landlords need only comply with existing Residential Tenancy laws. There are otherwise no positive obligations on landlords and property managers for tenants while living in residential properties. This means, if a tenant decides to carry out repairs on the property and a serious incident occurs, the landlord and property manager are not liable.

Tenants also have a responsibility, when work is being carried out, to take reasonable care for their own and others’ safety and must follow reasonable instructions given by the PCBU doing the work.

What is the Primary Duty of Care?

As PCBUs, landlords and property managers both owe a duty of care so far as is ‘reasonably practicable’ to ensure the health and safety of tenants, contractors and visiting members of the public affected by work on the property.

The primary obligation is to ensure all work carried out on the property is conducted safely and all foreseeable hazards are minimised. This includes ensuring people engaged to do the work are competent and appropriately qualified to do so. All parties likely to be affected by the work should be notified of potential hazards and how to eliminate or minimise exposure to these hazards.

What does ‘Reasonably Practicable’ Mean?

Landlords and property managers only have a responsibility in respect of things they can reasonably influence and control. This could mean discussing the scope of work with contractors, checking whether they are properly qualified and that they use safe work practices and intend to use correct equipment and materials for the job.

Tradesmen also have a responsibility to ensure the work they have been engaged to do causes no harm to themselves and anyone else on the property.

Where there are overlapping PCBU duties in relation to a workplace, landlords their property managers and contractors must communicate, cooperate and coordinate with one another to ensure work is undertaken in a safe and healthy way. The Regulator (Work-safe) offers a good example of cooperation where a landlord engages a contractor for repair work but beforehand arranges with the tenant to keep their dogs contained while tradesmen are on site. In that example, the tradesmen must in turn ensure no health and safety risks arise from the work they carry out on site.

Can Landlords Still Carry Out Work Themselves

The HSWA does not preclude landlords from carrying out work on their own property. Although, restricted work such as electrical, gas-fitting or asbestos removal must still be carried out by properly trained certified tradesman. Where landlords perform work themselves, there is an obligation to minimise risk under the HSWA.

Compliance

The HSWA is a principal based piece of legislation and does not contain a list of known hazards or prescribe measures for risk prevention. Instead, each PCBU must carry out investigations to determine what is ‘reasonably practicable’ to manage workplace health and safety risks in their own businesses. This creates a perfect opportunity for landlords and property managers to set their own health and safety standards.

Penalties for Non Compliance

As PCBUs, landlords and their property managers face higher penalties and tougher prosecutions under the HSWA. At the top of a three-tier penalties system, landlords who recklessly expose individuals to serious risk of injury, illness or death may be liable for 5 years imprisonment and a fine up to $600,000 for individuals and a $3 million fine for companies. At the other end of the scale, simply failing to comply with a duty could result in a fine up to $100,000 for individuals and a $500,000 fine for companies.

With these kinds of potential penalties, landlords and their property managers are well advised to familiarise themselves with their HSWA obligations and take necessary steps to ensure compliance and to avoid serious incidents occurring on premises they control.

Article written by Morrison Kent