REVIEW OF REGULATION OF PROPERTY MANAGERS. Summary of submissions

REVIEW OF REGULATION OF PROPERTY MANAGERS Summary f submissins The Review f Regulatin f Prperty Managers: Public Cnsultatin Dcument lked at whether prperty managers shuld be regulated, and was released fr cmment n 13 February 9. The clsing date fr submissins was 16 March 9. The Ministry f Justice received 138 submissins n the cnsultatin dcument. This paper prvides a general summary f the infrmatin and views expressed in thse submissins. The infrmatin prvided by submitters was smetimes incmplete r cntradictry. Sme ntes have been added t this summary t signal where this may affect the reliability f the respnses. A cpy f the cnsultatin dcument can be dwnladed frm www.justice.gvt.nz/prperty-managers-review. Infrmatin abut submitters It is imprtant t remember when reading this paper that a submissin may reflect the views f ne persn r many peple depending n whether the submissin is frm an individual prperty wner, an assciatin f prperty wners, several prperty managers within a cmpany, r an industry rganisatin. This was taken int accunt when analysing the views expressed in the submissins. The submissins ffered a range f different perspectives. Using the respnses in the submissin frm and statements in general submissins, the submissins have been put int the fllwing classes: A submitter wh is a: Hired prperty management services fr their prperty Offers prperty management services Licensed under the Real Estate Agents Act 1976 Organisatin Number f submissins Prperty wner 25 Prperty wner and prperty manager Prperty wner, prperty manager, and real estate agent Prperty wner and real estate agent 14 14 2 Prperty manager 31 Prperty manager and real estate agent 36 Prperty wners rganisatin 3 Prperty prfessinals rganisatin 6 Other Nne f the abve (fr example, a tenant). 7 TOTAL 138 Review f regulatin f prperty managers: summary f submissins 1

Prperty sectrs Sme submitters indicated which types f prperty they were interested in, and sme submitters identified mre than ne type f prperty, the apprximate spread is set ut belw. The types f prperty are explained in the cnsultatin dcument at paragraph 7. Residential prperty 7% Cmmercial prperty 23% Rural prperty 7% Membership f a prperty r a cnsumer rganisatin 9 submitters indicated whether r nt they belnged t a prperty rganisatin. 82% f these submitters said that they belnged t an rganisatin fr prperty prfessinals r prperty wners. Cnfidentiality 38 submitters requested that their submissin be made annymus fr the summary f submissins and their names have nt been recrded in the list f submitters. 11 submitters requested that their respnses t sme f the questins be kept cnfidential. T this end, the respnses in this summary have nt been attributed t the submitter that made them. PROPERTY MANAGEMENT SERVICES Questin 1 As a prperty wner, what kinds f services have yu sught frm a prperty manager? 48 submissins respnded t this questin. Prperty Type Services Residential Cmmercial Rural Initial inspectin f a prperty 82% 14% 4% Letting a prperty, including tenant r lessee vetting Ldging the bnd fr a residential tenancy* Cllecting rent Regularly inspecting the prperty Organising maintenance and repairs Prviding r cntracting fr building management services Regularly reprting t the wner Perfrming rent reviews Arranging the payment f lcal authrity rates and insurance, and in sme instances rganising the insurance in the first place 82% 14% 4% 91% 7%* 2%* 81% 15 4% 82% 14% 4% 82% 14% 4% 8% 16% 4% 8% 16% 4% 79% 17% 4% 78% 18% 5% 28% f the 48 submissins listed ther services r made a cmment. *Sme submissins nted that bnds had been ldged fr cmmercial r rural prperty, when bnds nly need t be ldged with the Department f Building and Husing fr residential prperty. These cmmercial and rural prperties may have had multiple uses r submitters may have inadvertently ticked the wrng bx. Review f regulatin f prperty managers: summary f submissins 2

Questin 2 As a prperty manager, what kinds f services d yu ffer, and in what prperty sectrs? 66 submissins respnded t the first part f questin 2. Prperty Type Services Residential Cmmercial Rural Initial inspectin f a prperty 76% % 4% Letting a prperty, including tenant r lessee vetting Ldging the bnd fr a residential tenancy* Cllecting rent Regularly inspecting the prperty Organising maintenance and repairs Prviding r cntracting fr building management services Regularly reprting t the wner Perfrming rent reviews Arranging the payment f lcal authrity rates and insurance, and in sme instances rganising the insurance in the first place 77% % 3% 92% 6%* 2%* 76% 22% 3% 77% % 3% 76% % 4% 76% 21% 3% 77% 22% 1% 76% 21% 3% 77% % 3% 5% listed ther services r made a cmment. * Sme submissins nted that bnds had been ldged fr cmmercial r rural prperty, when bnds nly need t be ldged with the Department f Building and Husing fr residential prperty. These cmmercial and rural prperties may have had multiple uses r submitters may have inadvertently ticked the wrng bx. As a prperty manager, hw is yur business structured (fr example, are yu a sle trader, in a partnership, r a cmpany)? Is yur business exclusively prperty management r d yu ffer ther services? 81 submissins respnded t the secnd part f questin 2, which asked abut business structure. Mst respndents nted that they were a cmpany (ften described as a limited liability cmpany). Other prperty managers said they perate as a sle trader, a franchisee, in partnership, r an in-huse prperty manager. Althugh sme respndents nted that they cmbined prperty management services with real estate sales, mst specialised in prperty management services r had a team dedicated t prperty management. Questin 3 T what extent d the services vary accrding t the type f prperty? Are sme services exclusive t a particular type f prperty? 76 submissins respnded t this questin. The submissins reflected mixed views. Thirty percent f the 76 submissins stated that the prperty management services prvided were the same fr all wners, regardless f the type f prperty cncerned. The ther 7% nted that there were significant differences in prperty management services accrding t the type f prperty cncerned. Sme submissins cmmented that the services varied because f the different laws that applied t sme types f prperty. Fr example, the Residential Tenancies Act 1986 has a specific disputes reslutin bdy fr residential tenants and landlrds, in which prperty managers may be appearing n behalf f wners. Cmmercial leases are nt gverned by the Residential Tenancies Act 1986. Cmmercial prperty managers may engage in asset Review f regulatin f prperty managers: summary f submissins 3

management and rent review negtiatins. Sme submitters cmmented that a residential prperty manager may be mre invlved in maintenance and inspectins f prperties than cmmercial prperty managers. One submitter nted that the nly qualificatin available fr residential prperty managers was the real estate salespersn curse, and that a degree qualificatin was available fr cmmercial prperty managers. Sme submitters cmmented that bth residential and cmmercial prperty managers need t be aware f prperty wners bligatins t avid incurring penalties. Fr example, cmmercial prperty wners have varius bligatins under the Resurce Management Act 1991 and the Building Cde, and residential prperty wners have bligatins under the Residential Tenancies Act 1986. Questin 4 Hw many peple d yu estimate perfrm prperty management services, and what d yu think is the average annual incme fr the different prperty sectrs? What is yur estimate f the value f prperty management t the ecnmy? Hw did yu calculate this value? 56 submissins estimated the number f prperty managers: estimates f the number f prperty managers varied cnsiderably, with mst estimates putting the number at between 1, and 5, prperty managers sme submissins cnsidered that the prperty management sectr was large and diverse, and had been experiencing grwth ver the last years, with many small independent prperty management cmpanies being established. 56 submissins estimated the average incme f prperty managers and, again, these estimates varied cnsiderably accrding t the sectr and regin that the prperty manager was wrking in. The estimated average incme was: $4, t $5, per year fr prperty managers in the residential prperty sectr $6, t $15, per year fr prperty managers in the cmmercial prperty sectr. 59 submissins estimated the value f prperty management t the ecnmy. Mst respndents estimated that the value was in the high millins r even billins f dllars. Other submitters cmmented that it was very valuable. Five submissins cnsidered that prperty management may be a billin dllar industry. Reasns given fr ecnmic value included: freeing up investrs time flw-n incme fr tradespeple and emplyees increasing prperty values thrugh effective asset management businesses paying taxes. CURRENT REGULATION OF PROPERTY MANAGERS Questin 5 The regulatry regimes in Australia, the United States f America, England and Wales, Sctland, and Ireland have been reviewed. Are yu aware f any ther useful verseas examples f regulatin r cntrls impsed n prperty managers? 67 submissins cmmented n this questin. Submissins said that ther useful mdels t lk at included the Ryal Institutin f Chartered Surveyrs, the United Arab Emirates and British Clmbia, Canada. In additin, submissins suggested lking at self-regulating mdels such as the Internatinal Facility Management Assciatin, the Business and Institutinal Furniture Manufacturers Assciatin, and the Australian Financial Markets Assciatin. One submissin said that the mdels in Ireland and the United Kingdm shuld nt be adpted in New Zealand. Review f regulatin f prperty managers: summary f submissins 4

POTENTIAL PROBLEMS WITH PROPERTY MANAGEMENT SERVICES Questin 6 As a prperty wner, what qualities d yu lk fr in a prperty manager? 75 submissins respnded t this questin. Each submissin identified mre than ne quality. Their respnses are listed belw. The number in brackets is the number f submissins that listed that quality as being necessary. Persnal attributes Knwledge and training Financial management Business management Hnesty (29) Gd and regular cmmunicatin (22) Integrity (18) Reliability (12) Trustwrthiness (11) Gd references (7) Practive apprach (4) Efficiency (4) Membership f an industry rganisatin, such as the Real Estate Institute f New Zealand r the Independent Prperty Managers Assciatin (4) Interpersnal skills (2) Experience (9) Knwledge (9) Qualificatins (5) Onging training (2) Skills (2) Timely payments (4) Gd financial practices, such as accurate mnthly accunting (3) Regular audits f accunts (2) Credit checks (1) Insurance (1) Financially secure (1) Gd systems (11) Understanding investment bjectives () Prfessinalism (8) Perfrmance recrd (4) N cmpeting r cnflicting interests (4) Prfile (3) Understands business relatinships and custmer service (3) Maximum number f prperties in each prperty manager s prtfli (3) Gd range f services prvided fr fee (2) Inspectins, including making reprts and taking phts (2) Gd access t tradespeple (1) Cmpany structure (1) Cmmissin-based (1) Questin 7 As a prperty wner, have yu experienced the srts f prblems identified in the public cnsultatin dcument? What was the nature, frequency, and effect f these prblems fr yu? 34 submissins respnded t this questin: 79% respnded yes - they had experienced these prblems 21% respnded n - they had nt experienced these prblems. While this questin was directed at prperty wners engaging prperty managers t lk after their prperties, submitters wh were nt prperty wners als answered this questin. Frm the 27 submissins that respnded yes, there were 172 entries against the prblems listed. The table belw summarises the respnses frm the entries f thse submissins that respnded yes. Review f regulatin f prperty managers: summary f submissins 5

Prblems Yes respnses $1 14,999 $15, 199,999 $, + N figure prvided Pr cmmunicatin 25 15 1 a 9 Prperty manager failing t act in accrdance with instructins, r acting utside the agreed authrity Prperty manager failing t cmmunicate a cnflict f interest Prperty manager failing t inspect a prperty thrughly r at all Prperty manager returning bnd mney t a tenant even thugh there is prperty damage Prperty manager failing t issue a timely evictin ntice Prperty manager failing t ensure gd standard f repairs r failing t rganise repairs Prperty manager failing t chase up nnpayment f rent and allwing rent arrears t grw Prperty manager failing t ldge a bnd fr a residential prperty with the Department f Building and Husing Prperty manager failing t pass rent n t the prperty wner r pay third parties 1 9 5 1 c 4 21 13 1 b 6 9 6 1 a 2 17 9 1 7 16 8 2 a 6 17 12 5 11 2 9 12 3 1 d 8 Other prblems 15 2 1 c 12 Ntes abut the respnses: The dllar range selected fr the lss reflects the jurisdictin limits f the csts. The prpsed new limit fr Disputes Tribunals is $15, (r $, by agreement between the parties). The limit fr the District Curt is $199,999, and the High Curt can hear disputes fr the value f $, r mre. a This figure cmes frm a prperty manager wh has knwledge f a situatin in which failure t inspect a prperty thrughly resulted in a financial lss in excess f $15, fr the wner. b In relatin t these figures, it is unclear whether the lss suffered resulted frm ne ccasin r several ccasins, as the submissins recrded these prblems as ccurring n an ccasinal r nging basis. c These figures were recrded by a prperty manager and appear t reflect the value f such cnduct t prperty managers, rather than examples f situatins where a specific prperty wner has suffered lss in excess f $,. d This figure was recrded by a prperty manager. It appears that this is the manager s estimate f the cllective lss t a grup f wners frm a cuple f events f which that manager was aware. Frequency f prblems As nted abve, frm the 27 submissins that respnded yes, there were 172 entries against the prblems listed, and it appears that if a prblem had been experienced by a prperty wner it had generally ccurred mre than nce. Review f regulatin f prperty managers: summary f submissins 6

Seriusness f prblems experienced Infrmatin was given abut the seriusness f the prblems fr 97 f the 172 prblems recrded in submissins. Nte that 1 was nt serius and 5 was very serius. Prblems Number f respnses Seriusness 1 2 3 4 5 Pr cmmunicatin 21 6 3 3 6 3 Prperty manager failing t act in accrdance with instructins Prperty manager failing t cmmunicate a cnflict f interest Prperty manager failing t inspect a prperty thrughly r at all Prperty manager returning bnd mney t a tenant even thugh there is prperty damage Prperty manager failing t issue a timely evictin ntice Prperty manager failing t ensure gd standard f repairs r failing t rganise repairs Prperty manager failing t chase up nnpayment f rent and allwing rent arrears t grw Prperty manager failing t ldge a bnd fr a residential prperty with the Department f Building and Husing Prperty manager failing t pass rent n t the prperty wner r pay third parties 12 1 2 3 2 5 7 1 3 1 2 14 1 2 3 4 4 6 1 1 1 3 9 3 2 4 8 2 3 2 1 2 2 2 4 5 2 3 4 4 Other prblems 1 1 Questin 8 Des the ccurrence f these prblems vary depending n the type f prperty cncerned (fr example residential, cmmercial, r rural)? 45 submissins respnded t this questin: 27% respnded yes - they think the prblems vary acrss the different prperty sectrs 49% respnded n - they d nt think the prblems vary acrss the different prperty sectrs 24% prvided cmments but did nt answer yes r n. Examples f the main cmments prvided in respnses t this questin are: the prblems depend nt n the prperty sectr but n whether the prperty managers used rbust prcesses that few prblems ccurred in the cmmercial sectr, althugh ne submitter suggested that there may be mre prblems ccurring with the management f lwer value and lder cmmercial buildings Review f regulatin f prperty managers: summary f submissins 7

that there are prblems with residential prperty management, with ne submissin nting that residential prperty management was mre time cnsuming. Questin 9 Are there any prblems that are peculiar t unit title, cmpany share, r crss-lease prperties? 66 submissins respnded t this questin 5% respnded yes - they think there are prblems in this area 33% respnded n - they d nt think there are prblems in this area 17% prvided cmments but did nt answer yes r n. Examples f cmmn prblems described in the submissins include: failing t attend bdy crprate meetings pr bdy crprate management prperty managers nt being aware f rules and bligatins t tenants and wners. One submitter nted that prperty managers shuld understand certificates f title, issues that apply t title, and hw thse issues may affect the investr-wner and tenants r prspective tenants. Submitters raised several issues unrelated t prperty management services r prperty managers. These will be passed n t the Department f Building and Husing fr its infrmatin. Questin As a prperty wner deciding whether t engage a prperty manager, d yu take int cnsideratin hw mney will be handled n yur behalf (fr example, using trust accunts r audits)? 61 submissins respnded t this questin 69% respnded yes - they d take mney handling int accunt % respnded n - they d nt take mney handling int accunt 11% prvided cmments but did nt answer yes r n. While this questin was directed at prperty wners engaging prperty managers t lk after their prperties, submitters wh were nt prperty wners als respnded. Thse ther submitters made up: 21% f the yes respnses, 27% f the n respnses, and 43% f the cmments. Examples f the preferred methds f reducing the risks assciated with mney handling include: limiting the maximum amunt f mney held by a prperty manager r having the tenant pay the wner directly the prperty manager using special accunting sftware and enabling wners t mnitr transactins electrnically having the prperty manager use trust accunts and trust prcedures as a minimum standard (althugh there were mixed views abut this apprach) the prperty manager having a separate bank accunt fr each prperty wner the wner f the prperty management cmpany being respnsible fr cntrlling the bank accunt and hlding the accunt in their name independent auditing and regular reprting t the wner, fr example, thrugh a prfessinal accunting system r regular reprting t the wner having the infrmatin prvided in statements include, as a minimum: the agreed rent, the prperty manager s fee, and what the prperty wner is wed. Review f regulatin f prperty managers: summary f submissins 8

Questin 11 As a prperty wner, have yu experienced prblems with mney handling by a prperty manager? If s, what were thse prblems and hw did yu reslve them? 55 submissins respnded t this questin: 14% respnded yes - they have experienced prblems with mney handling by a prperty manager 75% respnded n - they have nt experienced prblems with mney handling by a prperty manager 11% prvided cmments but did nt answer yes r n. While this questin was directed at prperty wners engaging prperty managers t lk after their prperties, submitters wh were nt prperty wners als respnded. Thse ther submitters made up 22% f the n respnses and 5% f the cmments. The types f mney-handling prblems experienced by prperty wners related t: bnd mney: delays in claiming back bnd mney r returning bnd mney withut prperly inspecting a prperty rent mney: nt passing rent n t the wner (including skimming, which invlves stealing small amunts f mney frm multiple wners accunts), hlding rent mney fr t lng, nt tracking rent mney, miscalculating rent due and making unauthrised deductins nt paying a third party, which may result in a prperty wner being liable fr penalties fr late payments using ne wner s mney t pay anther wner s bills charging an wner fr wrk dne n anther wner s prperty being prvided with unclear statements, s that wners are unable t effectively track what is happening with their mney. Questin 12 As a prperty wner, what d yu d t ensure that mney cllected by a prperty manager n yur behalf is either paid t yu r paid t a third party in accrdance with yur instructins? 55 submissins respnded t this questin. While sme wners preferred t receive the mney directly, mst wners wh respnded relied n a cmbinatin f checking bank statements and receiving regular reprts frm their prperty manager. Prperty wners wuld relax this self-checking system nce trust had been established with their prperty manager. Sme submitters nted that the availability f nline banking has made checking accunts easier. Other submitters received all tax and expense invices, and checked these against their bank statements. Other techniques used by wners related t cmmunicatin and giving clear instructins, such as having a signed cntract with the prperty manager which set ut the manager s r firm s plicy fr mney handling r putting all instructins in writing. Sme wners felt cnfident relying n the systems that the prperty manager used. Infrmatin prvided by prperty managers in respnse t this questin has been included under questin 14. Questin 13 What are the risks assciated with prperty managers cllecting and hlding prperty wners mney? In yur experience, hw much mney wuld a prperty manager typically hld and pay n t a prperty wner r third parties in respect f each prperty? 93 submissins respnded t this questin. Many submitters said that there was little risk assciated with mney being cllected and held by prperty managers. Examples f identified risks include: Review f regulatin f prperty managers: summary f submissins 9

theft, fraud, and nn-payment f rent the prperty manager failing t ldge bnd mney the prperty wner being unable t get payment f mney wed (fr example, when a prperty manager becmes inslvent r ges verseas) the prperty manager using the wner s mney fr persnal purpses befre paying the wner the prperty manager lsing mney thrugh negligence the prperty manager paying a third party fr incmplete wrk the prperty manager having t pay fr unauthrised repairs and bills. Five submissins nted that the first transactin that the prperty manager perfrms fr the prperty wner is the riskiest, particularly where it includes cllecting bnd and rent mney frm tenants, because f the amunt f mney invlved and because this ccurs at a pint befre the wner has established trust in their prperty manager. Sme submitters cnsidered that the risks were cmparable t ther business transactins r shp assistants handling mney. Fr cmments abut hw t mitigate risks, please refer t questin. Submissins estimated that the amunt f mney typically held by a prperty manager: was frm $25 t $2,5 fr each residential prperty, and $, and abve fr each cmmercial prperty cllectively fr all wners varied frm $7, t ver $ millin, depending n the size f the cmpany was usually accrued fr up t a frtnight but, fr sme prperty managers, fr up t a mnth varied between regins. Sme submissins nted that prperty managers retain % f the rent payment fr maintenance and repairs plus 7% cmmissin frm rental incme befre passing the remaining rent n t the wner. Questin 14 As a prperty manager, what systems d yu put in place t manage the cllectin and distributin f mney, and t detect fraud and theft? 78 submissins respnded t this questin. In additin t thse respnses, we have included infrmatin prvided by prperty managers in respnse t questin 12 under this questin. Submitters wh cmmented n this questin frequently referred t the systems they used as members f an industry rganisatin: Members f the Real Estate Institute f New Zealand, wh are regulated under the Real Estate Agents Act 1976, are required t hld all mney received frm clients in trust accunts, which are audited three times per year. The Independent Prperty Management Assciatin ensures that members underg a Plice check. Members are als required t fllw a cde f ethics. This cde requires them t avid deceptive practices, and t act with hnesty, integrity, and in a prfessinal manner. The Ryal Institutin f Chartered Surveyrs nted that they have prvided their members in the United Kingdm with help sheets fr prperty management services. These help sheets cver issues such as mney handling standards. Systems cmmnly dealt with cmmunicatin with the wner and accuntability f staff members, fr example: prviding the prperty wner with a cpy f the tenancy agreement, s that the wner knws when and hw much mney the tenant has agreed t pay immediately cmmunicating with wners when rent is nt paid requiring the prperty wner t pre-apprve any qutes befre cmmencing repairs requiring dual signatures r the cmpany directr s signature n any cheques limiting staff access t bank accunts Review f regulatin f prperty managers: summary f submissins

having regular audits (independent, internal, r bth). Other examples f systems are reflected in prperty wners respnses t questin. These included, fr example using specialist accunting sftware, having detailed transactins and reprts, establishing regular payment perids, and enabling prperty wners t mnitr transactins electrnically. Questin 15 As a prperty wner, have yu experienced prblems with prperty managers failing t inspect yur prperty prperly? If yes, what damage ccurred and hw did yu reslve the situatin with the prperty manager? 55 submissins respnded t this questin. Of thse submissins: % respnded yes - they have experienced prblems with prperty inspectins perfrmed by a prperty manager 64% respnded n - they have nt experienced prblems with prperty inspectins perfrmed by a prperty manager 16% prvided cmments but did nt answer yes r n. While this questin was directed at prperty wners engaging prperty managers t lk after their prperties, submitters wh were nt prperty wners als respnded. Thse ther submitters made up 26% f the n respnses and 55% f the cmments. The types f prperty inspectin prblems experienced by prperty wners included the prperty manager failing t: identify r remedy damage t prperty; this ften related t sputing, leaks, carpets, rubbish r ventilatin maintain prperty set standards fr inspectins pass n a client s requirements t the prperty management cmpany when a prperty manager leaves perfrm pre-inspectins, making it difficult t attribute damage t and seek cmpensatin frm tenants make a list f the chattels at time f leasing prperty, s that is was difficult t find ut whether tenants tk chattels which belnged t prperty wner. Different remedies were pursued. Mst cmmnly, respndents changed prperty managers. Other remedies prperty wners used included: perfrming their wn prperty inspectins r attending inspectins with the prperty manager raising the issue with the prperty manager r making a cmplaint t the manager s emplyer taking a civil claim against the prperty manager claiming insurance fr any damage claiming against tenants (fr example, making a claim against bnd mney fr damage caused by tenants). Other prperty wners nted that they just paid any necessary csts themselves. Questin 16 What are the cnsequences and risks assciated with failing t inspect prperties? 85 submissins respnded t this questin. The main risk was financial lss t the wner and included instances f devaluatin f the prperty, tenant-related prblems resulting in damage r lss f incme (fr example, ver-crwding r unauthrised sub-letting), and ptential legal liability resulting frm the inactin f the prperty manager (fr example, failing t cmply with the Resurce Management Act 1991 r the Building Cde). In relatin t cmmercial prperties, submitters nted that a failure t inspect may result in a failure t btain a building warrant f fitness and might enable tenants t use a lack f maintenance as a bargaining chip during a rent review. Review f regulatin f prperty managers: summary f submissins 11

Submitters nted that financial lss can als ccur thrugh a failure in systems. Fr example, insurance may nt cver damage if it was nt detected early r during inspectins. If the prperty manager did nt accurately recrd chattels r the cnditin f the prperty at the start f the tenancy, the prperty wner may be unable t claim against the tenants. Submitters nted that bnd mney may be insufficient t cver damage if it is left unsptted, and in sme cases there is a risk that bnd mney may be returned even thugh there was damage. Sme submitters nted that the lsses culd be minimised thrugh early detectin, which als allwed wners t budget fr upcming expenses. Questin 17 As a prperty manager, what practices d yu put in place t ensure that prperties are prperly inspected? Hw effective are these practices? 77 submissins respnded t this questin. Examples f practices include: frequent inspectins (usually three t fur times per year), particularly fr new tenancies, and with fllw-up inspectins where an earlier inspectin identifies prblems a cmputer r manual system fr recrding an inspectin timetable, with alerts fr nn-cmpletin prviding an inspectin reprt t the wner, including phtgraphs f the prperty internal audit prcedures, such as peer reviewing staff members wrk having a prperty wner accmpany a manager n inspectins prviding an pprtunity fr regular cntact between tenants and landlrds. Sme submissins suggested that prperty managers need sufficient knwledge t carry ut their jb. Practices included: having cntinuing educatin fr staff members having regular staff meetings t discuss issues and best practice hiring specialised cntractrs fr mre detailed assessments r repairs nly hiring staff with a relevant tertiary qualificatin. Fr cmmercial prperties, sme submissins nted that they perfrmed inspectins f cmmercial prperty n an annual basis, and had frequent pprtunities t identify ther prblems thrugh their rle as a facilities manager. Questin 18 Hw d yu reslve prperty management disputes, and what were the assciated csts? 22 submissins respnded t this questin. Several submissins recrded mre than ne dispute. The cmmn disputes were abut: rent nt being cllected repairs, such as wh was respnsible fr rganising the repairs damage nt being detected and inspectins nt being cmpleted. Sme f the disputes arse because prperty wners and the prperty manager had different expectatins abut what services wuld be perfrmed. Mst f the submissins nted that disputes were reslved thrugh: emailing the prperty manager meeting with the prperty manager engaging a debt cllectr invlving a slicitr Review f regulatin f prperty managers: summary f submissins 12

making a cmplaint t the prperty manager s prfessinal bdy ging t a Disputes Tribunal. 15 disputes were taken t curt. One prperty manager nted that they had a standard arbitratin clause in all management authrity agreements, but in years they had nt needed t invke it. Submissins nted that the value f disputes was generally under $15,, with ne being between $15, and $199,999. The cst f reslving a dispute was generally nt mre than $2,, with mst disputes csting less than $5 t reslve. Prperty wners experienced a variety f results, such as: being awarded csts terminating the agreement changing prperty managers taking ver the management f the prperty themselves. Sme submissins frm prperty managers nted that sme disputes were reslved nce an wner understd their bligatins under the Residential Tenancies Act. Sme submissins prvided infrmatin abut prblems that prperty wners had experienced with tenants, as ppsed t prperty managers. These issues are nt relevant t this review. Questin 19 When wuld yu, as a prperty wner, cnsider taking a dispute t a Disputes Tribunal r t curt? What ther appraches have yu used t reslve disputes? 6 submissins respnded t this questin. Mst respndents t this questin wuld nt take a dispute thrugh a Disputes Tribunal r curt withut first trying t reslve the prblem thrugh infrmal channels. Mst prperty wners spke t their prperty manager r the prperty manager s supervisr. Appraches taken by prperty wners included: giving the prperty manager a warning where the prperty manager is a member f an industry rganisatin, making a cmplaint t that rganisatin speaking t ther prperty wners abut hw t reslve the dispute using a lawyer; fr example, arranging fr a slicitr t send a letter t the prperty manager asking fr an independent assessment f the issue mediatin arbitratin (an arbitratin clause can be included in the cntract) changing prperty managers. Sme submitters acknwledged that they wuld use Disputes Tribunals and the curts, with seven submissins nting that these frums were the last resrt. Sme submitters nted that they wuld nly use these frums fr specific purpse such as: disputing accunts r t seek redress fr criminal ffending, dishnesty, negligence, r breach f cntract n the part f the prperty manager. Tw submitters nted the expense assciated with using a Disputes Tribunal r the curts is a barrier t reslving disputes. Sme submissins cmmented n disputes with tenants, rather than prperty managers. These issues are nt relevant t the review. Review f regulatin f prperty managers: summary f submissins 13

Questin As a prperty wner, have yu experienced any prblems with using dispute reslutin services like the Disputes Tribunals r the curts t reslve disputes ver prperty management services? If s, what were they and were yu able t reslve them? 51 submissins respnded t this questin f thse submissins: 15% respnded yes - they have experienced prblems with dispute reslutin services 75% respnded n - they have nt experienced prblems with dispute reslutin services % prvided cmments but did nt answer yes r n While this questin was directed at prperty wners engaging prperty managers t lk after their prperties, submitters wh were nt prperty wners als respnded. Thse ther submitters made up 17% f the n respnses and 7% f the cmments. Submitters nted the fllwing prblems: delays the cst f enfrcing a Disputes Tribunal rder thrugh the curts incnsistencies in Disputes Tribunal rulings expense. Sme submitters prvided infrmatin abut prblems that they had experienced with the Tenancy Tribunal. The Tenancy Tribunal des nt deliberate n prblems between wners and prperty managers. It is slely cncerned with the relatinship between landlrds and tenants. Questin 21 D yu think that there are any gaps in the dispute reslutin services that are currently available? Are there ther dispute reslutin services available r that the review shuld cnsider? If yes, please specify. 78 submissins respnded t this questin. Of thse submissins: 41% respnded yes there are gaps in the dispute reslutin services r that there are ther methds the review shuld cnsider 47% respnded n there are n gaps in the dispute reslutin services r that there are ther methds the review shuld cnsider 12% prvided cmments but did nt answer yes r n. Prblems with the current ptins fr dispute reslutin identified in the submissins include: that decisin-makers d nt have specific knwledge f the prperty management industry r sectr (ne submissin nted that knwledge, experience and precedence are attributes f specialist reslutin schemes and that there is a gap fr prperty wners using prperty management services) that there is a need t speed up the reslutin f cases that there is a need fr heavier penalties that there is nthing t stp an incmpetent r dubius prperty manager frm cntinuing t prvide prperty management services that the Disputes Tribunals jurisdictin is t lw and shuld be increased t $5, fr prperty management issues that the cst f curt prceedings is expensive that there is n right f appeal frm Disputes Tribunal decisins that the Disputes Tribunals cannt enfrce debt cllectin that prving a psitin in a dispute is difficult. 12 submitters suggested ther dispute reslutin ptins such as mediatin, arbitratin, and allwing industry Review f regulatin f prperty managers: summary f submissins 14

bdies, such as the Independent Prperty Managers Assciatin r the Real Estate Agents Licensing Bard, which will sn be replaced by the Real Estate Agents Authrity, t cnsider disputes. Six respndents cmmented n prblems with reslving a dispute with tenants. These issues are nt relevant t the review. Questin 22 Are there any ther types f csts nt identified abve that wuld be assciated with dispute reslutin ptins? 6 submissins respnded t this questin. Mst f the additinal csts identified by respndents related t time. Fr example: time ff wrk fr the prperty wner, manager r emplyees t reslve the dispute time invlved in frmal dispute reslutin prcesses time spent n the phne time with a private investigatr t track dwn a prperty manager time delays in having a dispute reslved, which is aggravated if a prperty is left untenanted fr an extended perid f time. Other identified csts included: legal fees stress lss f interest n mney prperty depreciatin and repair csts that were nt cvered by a tribunal r curt award cell-phne csts fr cmmunicating with the prperty manager. OPTIONS FOR RESPONDING TO POTENTIAL PROBLEMS Questins 23, 24, and 25 The infrmatin belw summarises the respnses t the questins abut ptential slutins fr prblems arising with prperty managers, if the prblems are cnsidered serius enugh t require regulatin. Questin 23 asked submitters what slutin r cmbinatin f slutins they thught wuld best address any prblems assciated with prperty management services? What d yu cnsider t be a minimum standard, and why? Questin 24 asked submitters whether there are there any ther slutins that shuld be cnsidered. Questin 25 asked submitters whether there is any slutin r cmbinatin f slutins that they preferred. In particular, it asked: whether the system shuld be vluntary r cmpulsry and why. whether the system shuld apply t all r nly sme types f prperty (residential, cmmercial and rural) and why. what the submitter estimated t be the cmpliance csts assciated with the slutin. what the submitter cnsidered t be the benefits f that particular slutin r cmbinatin f slutins. The cnsultatin dcument asked whether submitters thught the ptential slutins shuld be implemented n a cmpulsry r vluntary basis fr each f the prperty sectrs (see pages 21-23 f the cnsultatin dcument). A regulatry regime can be vluntary, cmpulsry, r cntain bth vluntary and cmpulsry elements. Fr example: a vluntary scheme culd be established where a prperty manager was free t determine whether r nt t belng t an industry rganisatin that set standards fr its members and had mechanisms fr prtecting Review f regulatin f prperty managers: summary f submissins 15

cnsumers in return fr being allwed t hld themselves ut as ffering thse extra prtectins t cnsumers in cntrast, a cmpulsry scheme culd set minimum disclsure requirements fr all prperty managers r require all prperty managers t be licensed, r bth in a mixed scheme, there culd be cmpulsry disclsure requirements fr all prperty managers, and a vluntary framewrk fr different industry rganisatins t becme accredited s that their members can hld themselves ut as being certified r licensed prperty managers. Cnsumer awareness Public infrmatin: ne ptin is t publish mre infrmatin fr prperty wners s that they knw what t lk fr in a prperty manager and what t d if things g wrng: 91 submissins cmmented n this ptin. Of these submissins: 33 did nt want regulatin 16 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Cnsumer Awareness - Public Infrmatin 45 4 35 3 25 15 5 Residential Cmmercial Rural Cmpulsry Vluntary Disclsure: prperty managers culd prvide a disclsure statement t a prperty wner befre entering int an agreement. 79 submissins cmmented n this ptin. Of these submissins: 17 did nt want regulatin 15 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Cnsumer Awareness - Disclsure 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary 32 submissins made general cmments n hw t imprve cnsumer awareness. Review f regulatin f prperty managers: summary f submissins 16

Prfessinalism Disclsure: prperty managers culd prvide a disclsure statement t a prperty wner befre entering int an agreement. The disclsure statement culd set ut whether the prperty manager is a member f a prfessinal bdy and whether the prperty wner can cmplain t that bdy, any ptential cnflicts f interest, and what services will be prvided fr the fee. 91 submissins cmmented n this ptin. Of these submissins: 18 submissins did nt want regulatin 11 submissins als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the fllwing chart. Prfessinalism - Disclsure 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Minimum standards: ne ptin is t set minimum standards, which must be met befre a prperty manager can becme and remain a member f the industry r an industry rganisatin: 95 submissins cmmented n this ptin. Of these submissins: 19 did nt want regulatin 9 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary (fr example, standards wuld apply t prperty managers wh have jined an industry rganisatin) r cmpulsry are set ut in the chart belw. Prfessinalism - Minimum Standards 8 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Disciplinary system: ne ptin is t establish a disciplinary system t hear cmplaints abut a prperty manager s cnduct. 86 submissins respnded t this ptin. Of these submissins: 18 did nt want regulatin 7 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Review f regulatin f prperty managers: summary f submissins 17

Prfessinalism - Disciplinary System 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary 46 submissins made general cmments n hw t imprve prfessinalism. Knwledge and training Disclsure: prperty managers culd prvide a disclsure statement t a prperty wner befre entering int an agreement. This disclsure statement culd set ut infrmatin abut the prperty manager s training, qualificatins, and experience in the prperty management industry. 89 submissins cmmented n this ptin. Of these submissins: did nt want regulatin 4 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Knwledge - Disclsure 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Incentives fr educatin prviders: ne ptin is t create incentives fr educatin prviders and the industry t ffer specific qualificatins designed fr prperty managers. 79 submissins cmmented n this ptin. Of these submissins: 16 did nt want change in this area 1 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Review f regulatin f prperty managers: summary f submissins 18

Knwledge - Incentives fr Educatin Prviders 4 35 3 25 15 5 Residential Cmmercial Rural Cmpulsry Vluntary Minimum standards: ne ptin is t set minimum qualificatins r equivalent experience fr entry t the industry, r fr prperty managers t remain a member f the industry r an industry rganisatin. 98 submissins cmmented n this ptin. Of these submissins: 14 did nt want regulatin 1 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary (fr example, standards wuld apply t prperty managers wh have jined an industry rganisatin) r cmpulsry are set ut in the chart belw. Knwledge - Minimum Standards 8 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Cntinuing educatin: prperty managers culd be required t undertake cntinuing educatin. 85 submissins cmmented n this ptin. Of these submissins: did nt want regulatin 1 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Knwledge - Cntinuing Educatin 6 5 4 3 Cmpulsry Vluntary Residential Cmmercial Rural 51 submissins made general cmments n hw t imprve knwledge and training. Review f regulatin f prperty managers: summary f submissins 19

Mney handling Disclsure: prperty managers culd prvide a disclsure statement t a prperty wner befre entering int an agreement. This disclsure statement culd set ut hw the prperty wner s mney will be handled. 89 submissins cmmented n this ptin. Of these submissins: did nt want regulatin 3 als cmmented n cst. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the fllwing chart. Mney Handling - Disclsure 8 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Minimum standards: prperty managers culd be required t fllw minimum mney handling standards t becme r remain a member f the industry r an industry rganisatin. 89 submissins cmmented n this ptin, f these submissins: 9 did nt want regulatin 2 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary (fr example, standards wuld apply t prperty managers wh have jined an industry rganisatin) r cmpulsry are set ut in the chart belw. Mney Handling - Minimum Standards 8 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Annual audits: prperty managers culd have their accunts audited annually. 9 submissins respnded t this ptin. Of these submissins: 12 did nt want regulatin 3 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Review f regulatin f prperty managers: summary f submissins

Mney Handling - Annual Audits 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Trust accunts and annual audits: prperty managers culd maintain trust accunts and have them audited annually. 93 submissins cmmented n this ptin. Of these submissins: 13 did nt want regulatin 6 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Mney Handling - Trust Accunts and Annual Audits 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary 63 submissins made general cmments n hw t imprve mney handling practices. Inspectins Disclsure: prperty managers culd prvide a disclsure statement t a prperty wner befre entering int an agreement. This disclsure statement culd set ut what services will be prvided fr the fee, including the frequency and nature f prperty inspectins and what reprts will be prvided t the prperty wner. 96 submissins cmmented n this ptin. Of these submissins: 15 did nt want regulatin 1 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Review f regulatin f prperty managers: summary f submissins 21

Prperty Inspectins - Disclsure 8 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Minimum standards: minimum standards culd be set fr prperty inspectins, pssibly thrugh a cde f practice, fr prperty managers t becme r remain a member f the industry r an industry rganisatin. 91 submissins cmmented n this ptin, f these submissins: 16 did nt want regulatin 2 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary (fr example, standards wuld apply t prperty managers wh have jined an industry rganisatin) r cmpulsry are set ut in the chart belw. Prperty Inspectins - Minimum Standards 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary 33 submissins made general cmments n hw t imprve prperty inspectins. Cnsumer redress Disclsure: prperty managers culd prvide a disclsure statement t a prperty wner befre entering int an agreement. This disclsure statement culd set ut dispute reslutin ptins and where the prperty wner can get mre infrmatin abut what t d if things g wrng. 87 submissins cmmented n this ptin. Of these submissins: 13 did nt want regulatin 2 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the chart belw. Review f regulatin f prperty managers: summary f submissins 22

Cnsumer Redress - Disclsure 7 6 5 4 3 Residential Cmmercial Rural Cmpulsry Vluntary Disputes frum: a frum culd be established r an existing frum mdified s that prperty wners can seek redress if a prperty wner fails t cmply with minimum standards. 82 submissins cmmented n this ptin. Of these submissins: 26 did nt want a new r mdified frum 2 als cmmented n the cst f this ptin. Preferences fr whether this shuld be vluntary r cmpulsry are set ut in the fllwing chart. Cnsumer Redress - Dispute Frum 5 4 3 Cmpulsry Vluntary Residential Cmmercial Rural 46 submissins made general cmments n hw t imprve cnsumer redress. Questin 26 Is there a slutin t which yu are cmpletely ppsed and, if s, why? 76 submissins respnded t this questin: 55% respnded yes there is a slutin that they ppse 36% respnded n there are n slutins that they ppse 9% prvided cmments but did nt answer yes r n. Submitters wh were ppsed t regulatin cmmented n the risk that increased csts wuld frce smaller peratrs t clse dwn. Tw submitters cmmented specifically n the prhibitive csts assciated with audits and perating trust accunts. 18 submitters als cmmented that they believed regulating prperty managers with the real estate industry was inapprpriate because they cnsidered real estate sales and prperty management services were cmpletely different. Fur submitters were ppsed t any new bdy r rules, nting that: self-regulatin f the industry, such as thrugh an prfessinal rganisatin, was sufficient the current law and available redress were sufficient any additinal cmpliance csts frm regulatin wuld ultimately be passed n t tenants. Review f regulatin f prperty managers: summary f submissins 23

Thse submitters wh wanted regulatin were particularly cncerned abut nt having rules fr mney handling and letting activities, and cmmented that this wuld leave prperty wners vulnerable. Questin 27 As a prperty wner, hw much d the fees charged by a prperty manager influence yur chice f prperty manager? 54 submissins rated frm 1 t 5 the extent t which the fee influences their chice f prperty manager with 1 being nt at all and 5 being a lt : 1 ut f 5 24% 2 ut f 5 24% 3 ut f 5 29% 4 ut f 5 11% 5 ut f 5 12% While the questin was directed at prperty wners, submitters wh were nt prperty wners als respnded t this questin. Questin 28 D yu think prperty managers shuld be regulated, and shuld the type f regulatin vary between prperty sectrs? Why d yu take that view, and what d yu estimate the cmpliance csts t be? Submitters respnded t this questin accrding t their knwledge f, r views n, different prperty sectrs: 79 submissins indicated hw regulatin culd be applied fr residential prperties 39 submissins indicated hw regulatin culd be applied fr cmmercial prperties 4 submissins indicated hw regulatin culd be applied fr rural prperties. The preferences are set ut in the fllwing chart. % 8% 6% 4% N regulatin Vluntary Cmpulsry % % Residential Cmmercial Rural 63 submitters cmmented n why they take that view and what they estimate the csts t be. Varius estimates f cmpliance csts were prvided, ranging frm 1.5% f fees per prperty, $1,-$2, per prperty manager and $1 millin t be brne by the industry. Five submitters cmmented that regulatin shuld be vluntary and that allwing prperty managers t develp their wn minimum standards gave thse prperty managers a market advantage. Fur submitters cmmented that it shuld be left t cnsumers t chse what services and qualities they want their prperty manager t ffer r have. submitters supprted the intrductin f training fr prperty managers. Seven submitters referred t the invlvement r use f prfessinal industry bdies, such as the Prperty Institute f New Zealand r the Independent Prperty Managers Assciatin. Review f regulatin f prperty managers: summary f submissins 24