Keep your rental tidy
Presentation and duty of care is key to securing current market rent return and suitable long-term tenants.
31 July 2023
Q. We have been told that the rental return of our property is tied closely to its condition and we should always prioritise maintenance to protect our assets. What is the best way to manage maintenance, and do we need a preventative plan?
A. Presentation and duty of care is key to securing current market rent return and suitable long-term tenants. It will also give potential tenants assurances they will enjoy living at the property and foster a healthy relationship between landlord and tenant.
An unkept property can drastically impact tenant retention and your reputation as a landlord. Consider employing a property management company; a good property manager will always be on top of their game. They can help you put a preventative maintenance plan in place. This will also reduce costs for labour and repairs by identifying issues before they turn into a bigger problem.
One of the first steps is to make sure regular inspections are done to ensure your property is properly cared for by your tenants. This will allow you to pick up issues before they develop. It’s important to note some insurance providers require landlords to do inspections at a set frequency and may ask for proof they have been done.
Your agent should arrange and oversee any maintenance under an agreed value. If repair work is over the agreed value they will be in touch to discuss an action plan and obtain approval for costs involved. They should discuss the issue with the tenant in case there is an alternative suggestion to avoid unnecessary call-outs.
The landlord is responsible for any general maintenance that will prolong the life of their assets, such as house washing and gutter cleaning. This is where a structured maintenance plan is developed to ensure your property is cared for while keeping costs under control. If you have agreed to maintain the lawns and gardens, it is a good idea to schedule routine maintenance.
- Eric Hammond
Q. Regarding access to an Auckland neighbour’s property for drainage (sewerage pipe), I understand that if an agreement can’t be reached, the council will mediate. If there is no agreement at mediation what’s the next step?
A.If you want to access a neighbour’s drain, you (or your lawyer) should first check the council’s utilities map for the service routes and access points to the drain, and the record of title for your property. In particular, you should check whether the drain is publicly or privately owned, and whether an “easement” has been recorded on the title to your property.
An easement is a right agreed between a landowner and another party to use property (including drains) for a particular purpose. If an easement does exist, which confers you with the right to use the pipe on your neighbour’s property, the terms of the easement will usually outline the rights you have to access your neighbour’s drain.
If access is granted through the terms of your easement, you should make your neighbour aware of the terms and what you propose to do. If there is no easement, and the drain is privately owned, you would need to reach agreement with your neighbour to obtain rights to use it through a new easement. This may also require the consent of your neighbour’s bank. If consent can be obtained, you will then need to contact a surveyor for a plan outlining the easement area and engage a lawyer to register the easement instrument onto the title.
If your neighbour is not willing to agree, Auckland Council offer a facilitation service to resolve your differences. This is not a formal requirement but can avoid the expense of taking an application to court if you can reach a middle ground.
In the instance that your neighbour continues to refuse you access to the drain, the council is empowered to grant you the easement without needing your neighbour’s consent, where the drain is publicly owned. If it is not publicly owned, or where the council does not agree to provide you access to a publicly-owned drain, your only recourse would be making an application to court.
- Shane Campbell
Q. I recently let my rental property and shortly after the new tenants shared concerns about the textured ceiling. Their friend is an asbestos sampler and they’ve tested it and shared the results, confirming the ceiling contains asbestos. The tenants are worried about their health. What should I do?
A. It’s not uncommon to find asbestos in older properties, and it’s understandable that your tenants may feel worried. Firstly, it’s important to educate your tenants about the realities of asbestos. Living in a property with asbestos-containing material (ACM) does not necessarily pose a health risk if the material is in good condition and undisturbed.
To determine if the asbestos poses a risk, assess the ceiling’s condition. If it’s flaking or deteriorating, there is a higher likelihood of ACM becoming airborne and posing a risk to the tenants’ health. In such cases, it is crucial to promptly engage the services of a professional asbestos company to remediate the issue and minimise health risks. Preventative measures can also be taken to reduce the risk associated with the textured ceiling. Encapsulation, for instance, involves covering or preventing access to exposed asbestos fibres, preventing them from shedding and becoming airborne.
Make sure to tell your tenants about activities that may damage the ceiling, such as drilling holes or attaching items to it. Also, remind them to be cautious if using a bunk bed as it could easily disturb the ceiling. To safeguard against future asbestos-related risks, I would recommend you have an asbestos management plan prepared by a licensed asbestos remover. This plan will help address potential issues, particularly when contractors are involved in repairs or renovations that could potentially disturb materials containing asbestos.
- Ryan Weir
Q. I have a couple of rental properties and have just made an offer on another one, subject to finance. The bank has told me because I will own more than three rental properties they see it as a business, and I must pay business rates over a much shorter time period. Have you heard of this, and will it affect my weekly payments as I have already worked the figures out on residential interest rates over a 25-year term?
A. No bank should be doing this for a third property, so I suspect the banker has this wrong. The exception may be one bank I can think of where if your annual rental income is higher than earned income (salary or self-employed income) they tend to treat it this way.
This is one of the reasons we recommend split banking. By having your funding with more than one lender you can keep yourself out of the “one-bank trap”. This is better for asset protection reasons as well as avoiding issues like this.
Different banks have different criteria. As an example, one bank characterises more than two dwellings on one title as commercial and will price as such, where a different bank is fine treating six dwellings on a title as residential and again will price accordingly. Another example is apartments, where there are differences over how banks will treat the size of the apartment, whether they will include a deck as part of the size, and how the apartment is treated if there is a serviced accommodation component to it. Talk to a mortgage adviser and they should be able to get you around this.
- Kris Pedersen
Q. I am looking to purchase a house with the intent of developing the rear of the section, be it building a minor dwelling or subdividing and building a new house. Can I claim interest rate deductibility on a percentage of the purchase price as part of the land will be used for a new build?
A. If you get a code compliance certificate showing there is a new self-contained dwelling on the land, then interest on the money borrowed to build that, and part of the interest on the money borrowed to buy the property in the first place, will be deductible. You will need to formulate a reasonable basis for splitting the initial loan between the front part of the land and the existing dwelling versus the rear part of the land where you build the new dwelling, to determine what interest is deductible. I do this by apportioning the value of the property between the existing dwelling and the land first, and then splitting front and rear parts of the land based on area.
- Matthew Gilligan
Q. I’m a 76-year-old investor with three rentals and my home. I manage the properties and rents are paid into a specific bank account. I’ve learnt that if I die my accounts will be frozen until probate is granted. It appears that my solicitor would in effect become a rather expensive property manager until then. Is there a way to set up the properties to avoid probate and allow their transfer to my son and daughter. I need the income, or I’d gift the properties now.
A. This is more a legal question than an accounting one, but on death the process of gaining probate is the legal process by which your executor formally takes control of the estate’s affairs. The process can certainly be time-consuming, often taking eight weeks or more. I am not aware of any mechanism to avoid the process, suffice to say that you have ruled out a trust. This alone would not be a significant enough reason to form a trust, but for those that have one there are different processes that occur when a settlor passes away which may include the appointment of a new trustee and the changing of the power of appointment. The deed will detail what occurs on the death of the settlor.
- Mark Withers