Monthly Landlord Newsletters

Dealing with flood damage in tenancies

As we continue to contemplate Cyclone Gabrielle’s impact, many tenants and property owners are navigating the process for dealing with damaged tenanted properties.

When a tenanted property is damaged, but still habitable, property owners are responsible for fixing that damage. This includes the cost of hiring heaters to dry the carpet as well as the additional electricity charges from using them.

If the place is so seriously damaged it’s uninhabitable, property owners can cancel the tenancy with seven days’ notice and tenants can give three days’ notice to cancel (rent isn’t payable during the notice period).

While it’s pretty easy to determine a property is uninhabitable if a red sticker is on the door, it would otherwise pay to seek advice from an independent professional and consult your property manager before pulling pin on the tenancy.

Where a property is only partially damaged, the Residential Tenancies Act requires a rent adjustment commencing from the date of damage which takes into account the level of damage.  There’s no easy or fixed formula for this, but your property manager will have a good idea of what’s acceptable. Either the tenant or the property owner can apply to the tenancy tribunal to cancel the tenancy if the place is partially damaged.

If you would like more information on flood damage, discuss the situation with your property manager.

Minimising rental flood damage in the future

While the scale of recent events might seem insurmountable, they pose a stark reminder of the importance of preventative maintenance measures to minimise damage from minor flooding.

Did you know your Propertyscouts property manager can organise regular maintenance jobs to help minimise the chances of flooding? A property manager can set up an ongoing reminder to empty cesspits, ensure downpipes are functioning, check roofing and various other matters which will protect both the property owner and the tenants’ interests going forward.

What Cyclone Gabrielle could mean for insurance

Even before the floodwaters had fully receded, the media had turned to the question of what the disaster would mean for property insurance – flood affected and otherwise – going forward.

Stuff reported that the number of insurance claims resulting from the cyclone were unprecedented and NZ Herald reported insurance companies were receiving a ‘claim every minute’ even before the full impact of the cyclone was realised.

Some readers may recall the shock to the insurance industry caused by the Christchurch earthquakes and some shambolic claim processes that followed.  At that time, full-replacement insurance was the norm.  But the velocity of claims arising from the earthquakes resulted in industry changes so that now replacement insurance is virtually non-existent. 

We mention this as a reminder to check you have an adequate sum-insured value for your home insurance – if in doubt, consult a quantity surveyor. It also raises the question of what industry-wide change can be expected from insurers after this latest disaster?

Whether your property is at risk of flooding or not, it would be wise to anticipate an increase in insurance costs at your next renewal.

What to expect from interest rates?

Despite the reserve bank being steadfast in their approach to raising interest rates following the cyclone, some are suggesting the US banks collapsing might make the Reserve Bank change tact.

Interest.co.nz reported that, while most forecasters were onboard with the Reserve Bank’s projections a few weeks back, the advent of Silicon Valley Bank and others collapsing, combined with a weakening economy, might spell the end of interest increases after this month’s projected 25-point hike.

Noisy neighbours and bad vibrations

The issue of noisy neighbours is back in the media following reports of a ‘vibrating noise machine’ being used by some apartment dwellers to exact revenge on noisy neighbours.

Owners of multiple, adjoining properties have an obligation to take all reasonable steps to ensure none of their tenants are interfering with the reasonable peace of other tenants and any tenant is in breach of their tenancy agreement if they unreasonably disturb their neighbours.  But as discussed previously, it’s wise to advise the complaining party to make an official noise complaint to council in the first instance.  It might nip the issue in the bud, but even if it doesn’t, the evidence will be useful for any further action on the matter.

Tony Alexander Investor Insights Summary

Key points from the most recent Investor Insights include:

• There’s an increase in interest in purchasing apartments - this may be driven by the return of tourists and overseas students.
• The majority of investors are looking to fix their mortgage rate for one year.
•  Investors are concerned about the potential for insurance costs to increase.
•  Migration flows and return of tourism may add to the supply of ‘good tenants’.
•  There has been an increase in survey-respondents looking to purchase a new property following the uncertainty that came after the tightening of monetary policy last year.
•  Contrary to media reports, the majority of investors plan on holding on to their investment properties for more than 10 years, with 46% having no plans to sell.

Housing pain continues for vendors

Tales of the declining housing market continue this month with CoreLogic and Interest.co.nz reporting median housing values in high end suburbs falling by $300,000 or more.

The CoreLogic Mapping the Market tool has shown some of the country’s most upmarket suburbs such as Seatoun in Wellington and Westmere in Auckland declining in value – with Wellington values suffering the most.

Overall, the summer sales period has been dubbed ‘disastrous’ with figures from February showing both median values and volume of sales going down. 

While new listings for February were down, there’s still plenty of housing stock on the market due to properties taking longer to sell – 60 days on average which is 18 days longer than the same time last year.

Renter Scams

Another renter scam hit the headlines last month with the heart-breaking story of a Northland couple handing over personal information to a scammer before the fraud being found out.

Propertyscouts Director, Ryan Weir, provided comment to the Northern Advocate for the article, advising prospective renters to be wary of rent that seems too good to be true.  He suggested they inspect the property in person and undertaking background checks on the landlord, including an online check that they match the name on the property title.

The Latest Ask An Expert from Within the NZ Property Investor Magazine

Question

If tenants did not pay a bond when moving in, is their rental agreement legally binding? We acquired a property with existing tenants who did not pay a bond, what are the implications of this?

Answer

Part of the process of settling on a rental property, that has an existing tenancy in place, is having your conveying solicitor update the bond record.  During this process it should have become apparent the bond hadn’t been paid.   

Non-payment of a bond, in itself, does not render a tenancy invalid, but it can mean that the tenants are in breach of the tenancy agreement.

Depending on the tenancy agreement, there may be two scenarios to consider. 

If a bond was payable under the tenancy agreement: start by contacting your tenants to work towards a solution that works for both parties.  Be prepared to offer some flexibility around payment; perhaps it could be collected in installments.  Remember, it is a requirement to forward even partial bond payments to the Tenancy Services, within 23 working days. If the tenants flat out decline to pay the bond, you can issue the tenant with a notice to remedy.  If the breach remains unremedied you can apply to the Tenancy Tribunal to resolve the dispute. 

If no bond was required under the Tenancy Agreement: Your only avenue for redress is to negotiate with the tenants for a voluntary bond payment.  This would be considered a variation to the tenancy agreement.  Any variation to a tenancy agreement needs to be recorded in writing and state what the change is (such as introducing a bond). The document should also indicate when the change takes effect.  Once signed by all the parties, provide a copy to the tenant before change takes effect. You and your tenant should attach this to their own copy of the tenancy agreement.

If the tenants refuse to pay a bond voluntarily, there is only one option available with limited effect. According to Section 18(2) of the RTA, a landlord may collect a bond top-up when the rent is increased. However, this top-up is limited to four weeks' worth of the net amount of the rent increase.

In order to avoid situations where tenants fail to pay the bond, it is best practice for landlords to include a bond clause in the tenancy agreement. This clause should state that the agreement is conditional on the tenant paying the bond amount as stated in the agreement on or before a specified date. And, if the tenant fails to pay the full bond amount, the agreement shall be deemed to have never become unconditional, and neither party shall have a claim against the other.

Seasonal update - End of Financial Year

The end of the financial year is here. Now’s the time to make sure you have all your accounting records, repair and maintenance receipts, rates, statements and other documents in order and ready to provide to your accountant for filing.

Quote to ponder

“To be an investor you must be a believer in a better tomorrow.”

 – Benjamin Graham

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Disclaimer

Given the opinions expressed in parts of the email it’s important that we make it clear that the contents are opinions and observations and made in good faith.  

Propertyscouts NZ (2020) Limited, trading as Propertyscouts, and its associated parties (including directors, agents, employees, officers or otherwise) have attempted to provide   this information to the best of their ability but do not make any representations or warranties of any nature (intended or implied) as to the accuracy of the information on this communication. All recipients of this communication should conduct and rely on their own enquiries in relation to the information on this communication.

The information available on the properties listed for sale, rent or otherwise, has been obtained from the vendor or landlord of the property and the appropriate professional service providers. We do not and cannot verify or guarantee the accuracy of the information obtained in relation to the properties.

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