New regulations for property managers – yeah, nah
The government will move to enact a new regulatory system for property managers later this year, involving compulsory registration and licensing for individual property managers and their organisations, training and entry requirements, practice standards, and complaints and disciplinary processes. This announcement is welcomed but has left the industry asking for more detail, and tenants calling for self-managing landlords to be regulated, too.
Why has it happened?
The property management industry was deregulated in 2008, following the formation of the Real Estate Agents Authority or REAA, which, oversees licensing, sets industry standards, fees, and levies, and deals with complaints and disciplinary action against agents.
Catherine Goodwin personally and on behalf of Goodwin Realty submitted against deregulation, both by written and verbal presentations to the Panel.
Then associate justice minister Clayton Cosgrove on behalf of the Labour Party introduced the Real Estate Agents Bill. At the time he said property managers could easily be brought under the legislation if there was evidence that they should be. That was 14 years ago!!
What’s the goal?
The intention behind the regulation is to raise the quality of service provided by property managers and better protect renters from agents who are willing, for example, to rent non-compliant properties. Goodwins supports a recent comment from the Real Estate of New Zealand (REINZ) that said, “The move to introduce a Bill to regulate both individual property managers and property management organisations is important to ensuring an equitable residential tenancies market for all New Zealanders”. It is imperative property management services are regulated so there are standards and safeguards in place for a sector where millions of dollars are collected in rent each week, and which has an impact on something as important as someone’s home. We also continue to strongly support earlier comments from REINZ that, “regulation is required to create an industry where all property managers operate ethically and with honesty and transparency, where tenants are looked after, and where landlord’s assets are protected”. We believe that minimum education standards should be a prerequisite to working in the industry and that property managers should hold all client money in a trust account in order to protect both tenants and landlords.
So, what’s the problem?
Private, self-managing landlords, who currently represent the majority of the rental sector’s landlord arrangements in New Zealand will still be exempt from this proposed regulatory change. And that leaves a great risk for tenants that a high level of adverse behaviours will most probably continue to go unchecked.
A better approach
Goodwins is all for better regulation, but we believe industry-level regulation rather than simply regulating professional property managers is a better approach to lift the standard of services and behaviour of the industry as a whole. As submitted by REINZ, this would bolster confidence in the residential tenancy market as a whole.
Every active property manager and self-managing landlord should hold a form of licence, granted subject to a minimum standard of prescribed training, and reviewed on an appropriate cycle.
Newly licensed property managers should be supervised by their licensed agency, who is responsible for the provision of adequate training and liable for any substandard behaviour until such time the property manager is able to work independently.
We support REINZ’s additional submissions that raise the following key points:
- The licensing regime must be affordable and cost-effective and REINZ is calling for the penalties to be reconsidered. Aligning the penalties under the new property management regulatory framework with the general penalties in the Real Estate Agents Act 2008 is not appropriate as they are distinctly different remits
- Licensing should not be restricted to individual property managers but extended to property management organisations. This would mean responsibility for insurance and trust accounts sits with the organisation rather than individuals as property managers tend to be employees.
In summary, it is noteworthy that New Zealand is one of the few countries in the OECD that does not regulate its property managers. This lack of regulation has proven in our personal experience to have a negative impact on tenants and landlords who are reporting bad experiences. It also jeopardises the reputation of good property managers.
Get up to speed with proposed changes to property management legislation. Call your Goodwins property manager on 0800 GOODWINS for an update.