In 2008, the real estate industry was overhauled with the introduction of the Real Estate Authority (REA). This decision provided further consumer confidence that complaints would be dealt with independently and transparently.
An independent regulator sets a minimum industry standard to work to. Before this, the real estate industry was self-regulated by the Real Estate Industry of New Zealand (REINZ). The allegations were that REINZ looked after its own members to the consumer’s detriment.
Fourteen years on, the property management industry now faces the same discussion. Omitting Property Management from the REA birthed an influx of small start-up companies, many of which had little or no experience. Too many people fought for too small a slice of the pie, leading to an inevitable drop in standards.
Step forward to today, renting has become a hugely political topic. Many renters hoping to get onto the property ladder have been priced out by skyrocketing house prices. This is alarming considering that about one-third of NZ’s population rent. For Māori and Pasifika, this increases to over 50%. Property managers significantly influence many renters’ lives, and some of the most vulnerable tenants face a considerable power imbalance.
Then, the landlord’s needs and requirements must also be considered. When choosing a product, many of us consider the price tag. Property Management is no different. Many will choose an agent offering cheaper fees to save themselves some money. Too often, though, the opposite is true. And, as margins get tighter, service levels drop.
Regulation could mean additional costs. The associated charges will be minimal for those already running their business as if the industry was regulated. Likely costs could include:
- Compulsory professional development and qualifications.
- Licensing costs similar to those that real estate agents pay.
- Additional charges around Trust accounts and auditing requirements.
- Compulsory insurance such as professional indemnity and public liability.
- Membership fees with organisations such as REINZ.
Many professional companies will already be committed to offering this in their service. Others, however, will not. Additional costs will undoubtedly impact their profit margin unless they pass these costs to the consumer.
Some may argue that these will be passed on to tenants as additional rent. While there may be some truth in this, the most significant driver behind what happens with rents is the supply vs demand of rental properties. Regulation won’t have as profound an impact on rising rents as offsetting interest deductions against rental income would.
Currently, if a property manager fails to honour a contract or operates unethically, the landlord has nowhere to turn. A Disputes Tribunal for property managers would ensure that standards are met and the landlord’s money stays secure.
Holding Property Managers and the companies they work for to greater account raises industry professionalism. A better-educated sector means landlords and Property Managers understand the responsibilities of providing warm, safe, and dry homes for every tenant across the country.
A decade overdue, but regulation of the property management industry is finally on its way.
David Faulkner is the General Manager of Property Management at Property Brokers.