Whether it is routine maintenance, emergency repairs, lease renewals or property vacancies, you will always have the landlord asking you to explain the necessity and costs involved. Property Management over the last decade has become much harder, and time consuming, as legislation has changed and people are taking others to tribunal over the smallest of things.
The first lease I prepared was in 1997. It was typed on a typewriter with carbon copies, and there was no such thing as inventories, CMA’s or online bookings. If someone had told me that in 18 years’ time (now I feel old) we would be arranging smoke alarms to be checked for every new lease I don’t think I would have believed them.
This is what owners are also having trouble understanding. With regards to legislative items such as smoke alarm checks, blind compliance and pool certificates, the simplest way to explain your reasoning of these charges is that owners simply do not have a choice. If an owner refuses to comply, you as a managing agent must cease management of the property or else you will be the one at tribunal. My advice is to include these in a monthly/quarterly newsletter or as a note on all owners statements along the lines of ‘’you may notice additional charges appear on your statements over the coming months for smoke alarm servicing these are legislative requirements and MUST be performed. Please see attached information”.
Signing of a Form 6: It still bewilders me that upon due diligences there are still agencies that do not have a signed copy of either a 20A or a Form 6 on file. I am not talking hard copy but even just a scanned copy. The rules are the same – without a copy signed, if the owner refuses you must immediately give the property to them to self-manage. I will also point out the rule is quite simple – if OFT find out you are managing a property without an agreement , you have been illegally representing the owner and should not have been collecting any fees for the entire period you have acted without a signed agreement. Therefore, you will have to refund ALL fees collected back to the landlord and face a heavy fine from the OFT.
Maintenance: This is by far the toughest item to be agreed upon. Although there is that lovely little section in the management agreement where the landlord indicates they agree for you to spend $500.00 or 2 weeks rent (for example) I highly doubt they will be happy when you spend $450 on general repairs that may not have been urgent but make the tenant more comfortable. The phone call comes in and the irate landlord asks you why you repaired the curtain rod, loose toilet seat and dripping tap without their knowledge and you reply that the tenant requested it to be done. A landlord will not find this answer acceptable. Dealing with tenant maintenance requests that are not urgent is always difficult and each landlord will also view these maintenance items differently.
In short there are 2 types of landlords
1) Mr & Mrs “we appreciate your looking after our home as if it is yours”
2) Pay me the rent to pay my mortgage and that is all I care about.
Owner type 1 will appreciate that you are trying to keep the property well maintained, as well as making the tenant live as comfortably as possible so that they continue to remain great tenants and pay their rent on time and will live at their property for as long as possible. This tenant will understand that the landlord repairs things so the $10 rent increase will be justifiable.
Owner type 2 – Not so much! This is what we call a “tread carefully owner”. This owner will likely threaten to take the management off you at least twice in a 2 year period. The best way to approach this situation is to advise them that the repairs are necessary to avoid any unnecessary disputes, as tenants are very ‘legislation canny’ and to also mention that upon lease renewal we may look at increasing the rent. Similar to above, but the mention of more income is a focus. Beware not to promise though, due to CMA’s in the area this may not be possible when the lease is due for renewal. You may also need to remind this owner that they signed the section above allowing you to spend $$ without notification and if they would like that to be amended you are happy to do so. You may also like to mention that part of your job as managing agent is to maintain the property for the landlords benefit as well.
In saying that, you as the agent need to determine one thing ….is it worth it? If the property is boutique maybe it is, but if it is $300 per week with 7% fees, it may not be worth it. An onsite manager may view this differently, of course, as the complex is their livelihood.
Lease renewals: “no, I don’t care if the tenants are on a lease”. The agency cares because generally you will receive a lease renewal fee. A rent roll valuation is favourable – fixed term leases attract more income, the structure of a fixed term tenancy makes it much easier to prepare (busy periods, lease expiries, actioning rent increases within legislation etc). Owners need to feel that their half weeks’ lease renewal fee of $200 is warranted…what will they get for it?
1) Financial security
2) No insurance issues – Besides your industry insurers, AON, EBM, Terri Scheer etc some insurance companies such as banks, home insurers etc do not cover landlord insurance if tenants are on periodic leases.
3) Rent increases can be written into leases these days so there is nothing wrong with a 12 month lease with an increase after 6 months.
Property Vacancies: We have been lucky in QLD of late that vacancy rates are very low. However, some owners expect you to find them a tenant a day after the other tenant vacates. The general turnaround time should be close to a week minimum to allow the Property Manager time to perform the vacate inspection, have the tenant attend to anything they need to, plus have any maintenance carried out. This needs to be explained to your owner by the BDM upon signing the management agreement.
The majority of the time that properties cannot rent could be due to rent being too high. A property should not be listed prior to 4 weeks from vacate date or it will become stale. The average person needs to give 2 weeks’ notice to vacate and will begin looking 2 weeks before this notice. The property manager/leasing consultant will perform the CMA and advise the owner of what they feel we be an achievable rent. If an owner is insisting on a higher rent you need to advise them that you are happy to try higher for a 2 week period but if the property does not generate interest in that time they will need to look at dropping the rent. For some reason, owners see $450 (what they want) compared to the $430 you are advising, as a massive difference in rent, but they forget that for every week the property is vacant they have lost $430….which actually negates the $20 per week increase over 21 weeks (for each empty week).
The sign up process with a tenant, and owner, is the most important thing to cease objections. If you advise them of all your systems and procedures at the get go this will generally halt a lot of objections at a later date. The sign ups may take longer but this will stop a lot of irate phone calls in the future.
We are here to help at Real Strategix, if you have any questions or would like some advice please contact us.