When Regulation Of An Industry Is A Good Idea
The new rules flagged for property managers have been welcomed by many in the industry who see it as a moment to savour, writes David Faulkner.
2 October 2023
The government has released the draft Residential Property Managers Bill, and regulation of the industry is closer.
For many of us who have campaigned for this since 2008, when property management was left out of the Real Estate Agents Act (REAA), it is a moment to savour.
The benefits of this move far outweigh any added cost that this will have on our industry, which has a ridiculously low bar of entry. Currently, anyone can claim to be a professional property manager without any training, background checks or qualification.
The result of property management being left out of the REAA back in 2008 is that we have seen a massive increase in companies that offer property management as a service. Before then, it was largely done by companies that were members of the Real Estate Institute of New Zealand (REINZ).
The regulation will introduce a licensing and disciplinary regime similar to the real estate industry. The REA will become the regulatory authority, which is good. Property managers work within the real estate industry. There is no logic in forming an entirely new body to govern property managers as this would be a costly and unnecessary exercise.
Under One Roof
There is also likely a crossover between real estate and property management when there are disputes, so keeping everything under one roof makes sense.
The REA needs to establish clear guidelines around complaints. Most complaints should come from owners rather than tenants, as the Tenancy Tribunal is the correct space to resolve such disputes. The volume of unjustified complaints that the REA may receive is a potential issue.
Sometimes owners are frustrated with property managers when they are simply trying to do their job and abide by the Residential Tenancies Act (RTA). Owners have a different knowledge of the RTA, and some complaints the REA may receive should not see the light of day. This will be a process that will evolve once regulation comes into effect.
Many companies won’t be set up for regulation and will have to undergo reforms to ensure they comply. A residential property management organisation (RPMO) will have to operate using a trust account to hold clients’ money, which are subject to annual audit. This is important to protect the client’s money, as many companies do not operate trust accounts or undertake audits.
Exiting The Industry
Many smaller companies may take this as an opportunity to exit the industry and sell to RPMOs who are set up for regulation. This will lead to more properties being professionally managed by fewer companies. This doesn't mean we will see small property management companies disappear; many will thrive under this.
There are, however, too many small operators in a saturated market, with many struggling to profit. This leads to shortcuts and poor practices.
A consolidated industry is better as we see companies able to provide more support and training to teams, which should lead to a higher level of service.
It would be good to see a landlord register to better understand the use of residential dwellings in New Zealand. We are told there are over 600,000 rental properties in New Zealand, yet there are only just over 400,000 bonds lodged with Tenancy Services. Where are the 200,000 properties rented out without bonds lodged?
The Bill states that 42 per cent of properties are managed by an RPMO. I think this is speculation. A landlord register would make it easier to police non-compliant landlords, and we would have sufficient data to make more informed decisions.