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Property Management

Reasonably clean – is it clean enough?

 

The word ‘reasonable’ is found throughout the Residential Tenancies Act 1986 but this can be difficult to navigate because one person’s interpretation of ‘reasonable’ is not the same as another’s. One area that has proven troublesome for landlords and tenants is to establish what is ‘reasonably clean and tidy’ when it comes to vacating a property.

 

As per section 40 of the Residential Tenancies Act 1986, “the tenant must ensure that the premises are left reasonably clean and tidy and remove all rubbish”. A recent Tenancy Tribunal case clarified what ‘reasonably clean and tidy’ means:
The Tribunal stated that "the words ‘reasonably clean and reasonably tidy condition’ do not impose an absolute standard. This  standard will vary according to the age and condition of the premises. There is no requirement that each and every individual item in
the premises be left ‘reasonably clean and tidy’, only an overall obligation in relation to the tenancy premises. Also, a tenant generally should not be expected to keep the premises any cleaner and tidier than they were at the commencement of the tenancy."

 

Harcourts property managers conduct thorough vacating inspections, comparing the ingoing and outgoing reports to establish the condition of the property when the tenant took possession and when the tenant vacated, using photographic evidence where possible. If some items in a property are not clean when a tenant vacates, a property manager will request that these items are cleaned and if necessary, apply to the tribunal for cleaning costs. We are finding, however, that we may not be awarded the cleaning costs, as the tribunal has stated that there is no requirement for each and every item to be clean.

 

Landlords should be aware that some Adjudicators are stating that landlords should expect to professionally clean a property between tenancies. We consider this acknowledgement that ‘reasonably clean’ is not actually considered clean enough for the
commencement of a tenancy and we tend to agree. To hand over a ‘very clean’ property at the commencement of a tenancy is the best possible start to a trouble-free tenancy. The opposite can also hold true for the beginning of a troublesome tenancy, something good landlords and property managers avoid. Fortunately, many tenants do leave the property in a very clean and tidy state and professional cleaning to take the property from ‘reasonably clean’ to very clean is not always required.

 

You can view the tribunal case here.

 


 

Help us protect tenants, landlords & property managers

 

New Zealand is one of the few countries in the OECD that does not regulate its property managers. Property managers are the gatekeepers of housing for some of New Zealand’s most vulnerable residents.

 

With home ownership at its lowest level in 60 years and the demand for rentals increasing, the Real Estate Institute of New Zealand (REINZ) is calling on the Government to formally review the need to regulate the property management industry, including public consultation, and announce its recommendations for reform before the 2020 election. Harcourts fully supports this initiative 
by REINZ.

 

Harcourts and REINZ believe that regulation is necessary to protect tenants, landlords and the reputations of those property managers who are acting professionally.

 

Why should property management be regulated?
The impact of poor property management practices is often reported in the media and is supported by research carried out by other groups who have called for regulation. Despite these reports, the changes in home ownership levels and demand for rentals in recent years, comprehensive public consultation on the need to regulate property managers has not been undertaken by the government since 2009. 

No regulation means:

  • Anyone can set up business as a property manager, without any experience or qualifications.
  • Property managers don’t have to hold funds in a trust account.
  • Property managers don’t have to hold insurance.
  • Money collected by property managers can be paid into the property managers personal account.
  • There is no compulsory code of conduct for property managers to keep them accountable.
  • There is no clear mechanism to remove poor performers from the industry.
     

Some examples of the damage caused by a lack of regulation:
 

  • According to liquidators, a property manager allegedly went out of business owing around $358,000 to 67 landlords.
  • A property manager allegedly admitted to a Parliamentary Select Committee that she was asking tenancy applicants to provide their bank statements to see where they were spending their money.
  • A property manager allegedly charged a tenant $4,140 as bond money and two weeks rent in advance, but failed to refund the amount when the tenancy application was rejected. View the Tenancy Tribunal Order here.
  • A property management company allegedly failed to lodge tenancy bonds and provide tenants with compliant insulation statements. View the Tenancy Tribunal Order here.
     

What could regulation look like?

Regulation could require property managers to have:

 

  • A minimum level of education to operate, such as the NZ Certificate in Residential Property Management.
  • Ongoing education obligations to ensure that they stay up to date with law changes.
  • Police or background checks before operating.
  • Tenant and landlord funds held in a trust account.
  • A mandatory Code of Conduct or set of standards to keep them accountable.
  • Fines or sanctions applied if they don’t follow the Code of Conduct or standards.
     

Together with REINZ, Harcourts is committed to protecting tenants, landlords and the property managers who do act ethically and transparently, by advocating for the regulation of the residential property management industry.

In response to the property management industry becoming deregulated over a decade ago, Harcourts offices maintained professional standards and our offices continue to hold rental funds in audited trust accounts and hold business insurance that protects our people and clients. Harcourts has its own accreditation programme that ensures our property managers maintain a high level of service and attend Harcourts and industry training annually. Harcourts also supports our property managers who are working towards the NZ Certificate in Residential Property Management (level 4).

 


 

Insurance Excessess

 

Recent changes to legislation regarding tenant liability under insurance claims, mean that if tenants or their guests carelessly damage a rental property, they are liable for the cost of the damage up to four weeks' rent or the landlord's insurance excess (if applicable), whichever is lower. This means that a landlord must disclose any insurance excesses on a tenancy agreement and provide a statement that a copy of the policy wording is available on request by the tenant.

 

Diane Nelson from Real Landlord Insurance says they have been fielding calls from throughout New Zealand from Landlords wanting to increase their insurance excesses (this bringing their premiums down).

 

However, they are concerned that many landlords won't of thought through the ramification of doing this,

 

Most claims against building (house) insurance policies are for events (eg; fire, flood, water damage) that are not the result of tenant damage and therefore the landlord may find themselves in a poor position with having to pay the higher excesses they have nominated. This should be thought through very carefully before changing excesses and the landlord’s financial ability to be able to cover the excess payable.

 


 

Important update for Landlords - Unlawful residential premises

 

Prior to 27 August 2019, tenants living in unlawful premises such as sleep-outs or garages were not always protected by the Residential Tenancies Act. Under the new Act, the definition of ‘residential premises’ has been revised. Now, regardless of whether the premises can be legally resided in, they will be under the jurisdiction of the RTA, giving the Tenancy Tribunal full jurisdiction over cases concerning unlawful premises.

It is important to note that under the RTA, landlords must comply with all legal requirements that relate to buildings and health and safety before the start of a tenancy.

 

At Harcourts, we do not manage properties that do not meet the relevant laws and bylaws, however, if landlords are in doubt about any obligations under an Act, or as to whether a property is lawful, they should take immediate action to investigate and remedy any breach.

 


 

Important Update around Insurance on rented property

 

New tenancy legislation was passed on 30 July 2019 which will affect landlords and tenants. These changes take effect on 27 August 2019. The bill amends the Residential Tenancies Act 1986 (RTA) and addresses tenant liability for damage, unlawful residential premises and contamination of rental properties.

 

Tenant liability for damage (and insurance)


There has been confusion in the property management industry since 2016 when a Tenancy Tribunal decision found that a tenant who damaged a rental property ‘carelessly’ could not be expected to pay the cost to repair. Prior to this, the expectation was that if a tenant caused the damage, they paid for the repair.

This amendment addresses a tenant’s liability for a careless act that causes the destruction of, or damage to, a property but limits their liability to a maximum of four weeks rent or the landlord’s insurance excess, whichever is lower.

 

Tenants get the benefit of a landlord’s insurance claim if they carelessly damage a property.

 

From 27 August 2019, a landlord must include information about the insurance for the premises in every new Tenancy Agreement. If they do not, this is deemed to be an unlawful act and they can face a penalty of up to $500.

The information must stipulate whether or not the property is insured and if so, what the excess amount is. This statement must also advise a tenant that a copy of the insurance policy is available for them to review upon request.

For existing tenancies, insurance information and/or a policy document must be provided within a reasonable time frame if requested.