Residential property managers could face fines of up to $30k for misconduct under proposed regulations

Property / news

Government proposes regulating residential property managers next year with stiff financial penalties for those that break the rules

16th Feb 22, 1:30pm by Greg Ninness

The Government has moved a step closer to regulating residential property managers, releasing a discussion document on its proposals ahead of introducing legislation next year.

Under the Govenment's plan both individuals working as property managers and organisations offering property management services would be regulated. However, the regime would not apply to landlords who manage their own properties/tenants themselves, or to commercial property managers.

Individuals working as property managers would need to be licensed, there would be specified industry standards and an independent complaints panel would be established.

The Government's preferred option is to have the Real Estate Authority, which regulates real estate salespeople and agencies, as the main agency overseeing the regulations, but it is also considering an option for the Tenancy Tribunal to consider complaints and the Ministry of Business Innovation and Employment to be the industry regulator.

The standards individual property managers would need to meet to qualify for a property manager's licence have been set at a relatively low level.

The main ones are:

Being at least 18 years of age.
Passing a fit and proper person test.
Completing a basic training course which may be for as little as 15 hours in total.
Committing to ongoing development training of at least 20 hours a year.
They would need to comply with an industry Code of Conduct.

Property management organisations would need to conduct all financial transactions through an audited trust account, hold professional indemnity and public liability insurance and also comply with a Code of Conduct.

Under the proposals being considered, both individual property managers and the companies they work for could face substantial penalties for failing to meet industry standards or misconduct.

It is proposed that a Complaints Committee be established, consisting of a lawyer, someone with property management experience and someone with experience in consumer affairs, which will be able to impose penalties of up to $10,000 on an individual property manager or $20,000 on a property management company, if it finds them guilty of "unsatisfactory conduct."

The committee could also censure property managers and management companies, require them to make an apology or undertake further training.

Where the committee determines a complaint involves the more serious issue of misconduct, it will refer the matter to a Disciplinary Tribunal, which will be able to impose fines of up to $15,000 on individual property managers and $30,000 on property management companies.

It will also be able to order a licensee to pay complainants up to $100,000 to cover their costs or as compensation.

The consultation process on the proposals runs until April 19.

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25 Comments

by HW2 | 16th Feb 22, 1:39pm 1644971956

Yep that will work :) let's DOO them

by CWBW | 16th Feb 22, 1:53pm 1644972793

Another money grab by the Labour government.

The total cost of compliance will be amortised into rents accordingly.

Don't blame us renters, that's the real cost of renting.

by Brock Landers | 16th Feb 22, 2:12pm 1644973935

Property managers that conduct themselves unsatisfactorily will price themselves out business in competition with those that don't.

It might just be time for property managers to up their game. The logic isn't even fuzzy.

Qualifying as a "fit and proper person" will no doubt be a challenge for some.

by Kjeldorian | 16th Feb 22, 2:58pm 1644976690

If you are managing the property yourself and have to pay for a licence and throw in 20 hours a year for training do you think the landlord will absorb that cost themselves? Or do you think they will pass the cost on to renters?

by Greg Ninness | 16th Feb 22, 4:08pm 1644980890

As the article states: "the regime would not apply to landlords who manage their own properties/tenants themselves." So they won't need a licence or have to pay fees.

by RickStrauss | 16th Feb 22, 5:15pm 1644984952

Expecting a landlord to read the article before complaining, eh?

by Kjeldorian | 17th Feb 22, 7:03am 1645034604

Not a landlord.

by Kjeldorian | 17th Feb 22, 7:02am 1645034561

Sure.

Do you think property managers will just soak up the costs or will they pass it on to landlords who will pass it on to tenants?

by RickStrauss | 16th Feb 22, 5:17pm 1644985024

If you can put rent up to whatever you want whenever you want you shouldn't put up with such poor yields.

Moreover, it's high time the cowboys in property management were required to show some professionalism.

by Cheetahlegs66 | 16th Feb 22, 1:49pm 1644972583

Will Kainga Ora be deemed an irresponsible landlord? Complaints by neighbours around antisocial behaviour (including violence) of many of their tenants and they do not evict. Was it 3 evictions in a 12-month period out of the thousands of properties owned from a recent OIA? In some cases multiple call outs by Police.

Double standards. Oh, and they have a delayed date to meet the healthy homes standard.

Hating Labour since 2017.

by frugalhamster | 16th Feb 22, 2:26pm 1644974770

Yay for more guilds and guild monopolies.

by structural engineer | 16th Feb 22, 2:55pm 1644976540

Okay with it as long as it applies to both parties, tenants can face similar fines, because its needs to be balanced. 30k damage isn't really covered by the bond is it.

by pacifica | 19th Feb 22, 6:49am 1645206580

it is designed to protect landlords who use property managers. This should help protect landlords from managers that collect rent form tenants but don't pass it on (personally experienced) and then do a runner, or who just clip the ticket (experienced with different company) and don't bother inspecting properties or properly vetting prospective tenants (another company let to their friends overseas and instructed rent and notice periods/cleaning not needed then both fly by night). Several have actively been committing theft and fraud but when chasing for justice the manager can leave, the companies could phoenix. Property managers are unregulated nightmares for property owners, (not tenants). They can do unlimited amounts of fraud and walk away untouched by justice and responsibility. Much like why real estate agents need to be regulated for property owners and buyers. Regulation like above is an exceedingly low bar to cross but at least it would be there and better than no bar.

by HouseMouse | 16th Feb 22, 3:12pm 1644977538

The government doesn't seem that it can do anything other than introduce more laws and regulations, many of which generate unintended consequences.

by nigelh | 16th Feb 22, 4:18pm 1644981536

Have bad property managers been simmering for some time with numerous incompetent property managers in the business? Does Labour or some industry body actually have a record of complaints about property managers?

Has the property management industry called for this themselves? From the govt discussion document

...... "real estate and property management companies and industry bodies representing property managers have highlighted the significant risk that a lack of common industry good practice standards and controls, and an accessible independent disciplinary and disputes resolution process pose to property owners and tenants." .........

If this is the case why hasn't the property industry drawn up a set of guidelines?

Are estate agents not already self regulating?

Article author has not canvassed property industry bodies to see if they want it.

Ongoing development training for 20h per year. You've got to be joking. An 8h day is all that is needed.

Having been a landlord for about 2-3 years I used a high street Real Estate Agent as a property manager and from my perspective they did a good job. Also selected the two tenants I had.

by Solve_it | 16th Feb 22, 10:13pm 1645002801

I've had a property manager who cost me 25k in negligence and there was seemingly nothing I could do about it so I'm all for the new legislation.

by pacifica | 19th Feb 22, 7:03am 1645207395

Yes easy research shows many property owners have been screwed by dodgy property managers. No, real estate agencies do not self regulate, no one does The issues are so widespread and justice often unobtainable for affected property owners. You can see the news & courts as well for those complaints bubbling to the surface of public interest; they can try but often fail at getting recompense. The issues with property management and sales are often far too many in a booming property market, with jobs that need no quals or ethics.

by Craig Gerzon | 16th Feb 22, 4:30pm 1644982226

How about similar fines for errant tenants ?

by pacifica | 19th Feb 22, 6:50am 1645206636

by TonyBarnett | 16th Feb 22, 10:31pm 1645003917

Will the extra costs paid by property managers for training/administration costs provide a worthwhile benefit to tenants?

The extra costs will just be passed on to tenants by an increase in rents. Renters will again will be the losers in this.

The current changes imposed by this government on landlords has resulted in a reducing supply of rental properties, particularly outside of Auckland & rent increases exceeding cpi inflation. This change will only exacerbate this problem as landlords will just increase rents.

The unintended consequences will be that some private landlords will avoid this cost & not use professional rental property managers.

Who is causing the problem the government is trying to fix, private landlords or rental property managers?

A far better solution would be to start off with a voluntary standard for training etc, & free online training material rather than impose penalties for non-compliance.

by Greg Ninness | 17th Feb 22, 10:01am 1645045265

You are assuming that it is only tenants that will benefit from this, when it is also designed to protect landlords who use property managers. This should help protect landlords from managers that collect rent form tenants but don't pass it on to the landlord and then do a runner, or who just clip the ticket and don't bother inspecting properties or properly vetting prospective tenants, leaving the landlord with a big maintenance/clean up bill when the tenant departs. As property managers' fees must be paid the landlord this is now a very competitive market and I don't think you should assume that any compliance costs involved such as licence/training fees, will be directly passed on to the landlord.

by Property_Wizard | 17th Feb 22, 7:12am 1645035172

I manage under 10 properties for a few people as a side business. I will be shutting up shop if this is made legislation. I'm guessing it'll be just like the PINZ (Property Institute) continued education courses which are not cheap. Hence making my side business uneconomic. Typical Labour government, increase regulation and crucify anyone trying to get ahead.

by al123 | 17th Feb 22, 8:31am 1645039910

Regulation had to happen, because so many of the big players in property management have a business model which includes dodgy and sometimes downright illegal behavior.

by Nzdan | 17th Feb 22, 1:58pm 1645059497

*small violin plays*.

by RickStrauss | 17th Feb 22, 5:54pm 1645073659

One suspects the cowboys will whinge the loudest of all.