None of your business!

The Privacy Commission has finally released their updated guidelines for landlords and tenants.

Back in August of 2018, the Property Management hit the headlines for the wrong reasons. A property manager who was appearing in front of a select committee admitted to looking through tenants bank statements and observing the tenants spending habits. This infamously became known as the ‘KFC test’ as the property manager confessed to seeing certain tenants waste money on KFC as well as other poor spending habits.

There was outrage about this and this prompted the Office of the Privacy Commission (OPC) to investigate whether this was a widespread practice.

However, earlier this year, the industry made the news again as it was reported that a Facebook group called ‘Bad Tenants New Zealand’ had a list of 200 ‘bad tenants’ with 3200 members as a part of the group. Many of the members were property managers. The OPC had seen enough and announced an investigation in the practices that took place around tenancy selection.

The OPC started a process of interviewing stakeholders across both tenant and landlord groups. I too was interviewed back in March. It was a fascinating discussion. When I was asked about our industry’s knowledge of the Privacy Principles, I gave us a score of about 2 out of 10. Without going into the actual details of our discussion, it became clear that, as an industry, we were collecting far too much information from the outset and there was a lack of knowledge all round. Senior people within our industry were under the impression that they had to keep all tenant applications for 12 months after the end of a tenancy as section 123A of the RTA states that landlords must keep notices and correspondence with tenants and prospective tenants. What they failed to understand was a prospective tenant is someone we had offered to grant a tenancy to and not any applicant.

What also became apparent was the negative impact that occurred on applicants’ credit scores every time a credit check was undertaken. A credit score declined every time a credit check took place. Many applicants who were searching for rental properties were having multiple credit checks undertaken.

Also, the OPC had received complaints from employers in regards to the type of questions that were being asked of applicants. Questions such as ‘is their job secure?’ and ‘What are they like in their job?’ were being asked. When calling an employer, you basically only should be asking for confirmation that they work there.

It was an enlightening conversation and I went away knowing that change would be coming.

New changes announced

After months of investigation, the OPC has now launched a new compliance monitoring programme to ensure that property managers are acting in accordance with the Privacy Act.

The OPC will now be carrying out regular checks of rental agencies as well as an annual audit of application forms as well as privacy policies of the property management industry. This includes third party service providers.

Alongside the monitoring of the industry, the OPC have also released updated guidelines for tenants and landlords. As an industry we need to improve and the OPC has now got powers to take the following action against non-compliant agencies.

  • Warning letters
  • Access Directions
  • Compliance notices
  • Referral to the Human Rights Review Tribunal
  • Public interest inquiry
  • Public naming of an agency
  • Fines of up to $10,000 for failing to comply with a Compliance Notice

Tenants and prospective tenants also have the ability to anonymously report privacy concerns to the OPC.

The main concern that has arisen is the amount of information that some agencies and landlords are obtaining from the outset goes way beyond what should be being sought. The guidelines provided to landlords and tenants alike put applying for a rental property into a staggered process. The stages are as follows.

Enquiry to view the property

At this point, the only information you need as a landlord or a property manager is the name and the contact details of the prospective tenant.

Applying for the rental property

Once a prospective tenant has viewed the property and they decide they want to apply, they will then fill out an application form. At this stage the landlord will be able to ask for the following information.

  • Name and contact information
  • Proof of identity
  • Whether the applicant is aged 18 years or older
  • Number of people who would live at the property
  • Names only of occupants who will not be on the tenancy agreement (e.g. flatmates, dependents), but not other personal details about non-tenants
  • Contact details for landlord and non-landlord references
  • Consent for a credit report and criminal record check (to be obtained only if you are in negotiation with a tenant about an offer of tenancy)
  • Pet ownership
  • Whether any occupants are smokers
  • Whether the tenant has a legal right to remain in New Zealand for the duration of a tenancy (only if the tenancy is for a fixed term)

Once this has been obtained, the landlord or property manager will make a shortlist of preferred candidates. This is likely to be no more than two or three applicants. At this point you will be entitled to carry out the background checks such as references, credit checks and proof of income.

What property managers and landlords should not collect

Property Managers and landlords cannot ask for the following information from a prospective tenant.

  • Personal characteristics protected under section 21 of the Human Rights Act
  • Whether the tenants have experienced or are experiencing family violence
  • Spending habits
  • Employment history
  • Social media URLs

Probably the most contentious issue I hear about on my travels is whether or not the property manager should check the Facebook profile of the tenant. The new guidelines state the following.

‘A Facebook or other social media profile may be accessible by the tenant’s friends and family, but not by the world at large. You shouldn’t ask for permission to view social media profiles that are restricted in this way. Seeking or requiring access to such personal profiles is unreasonably intrusive on individuals’ personal affairs.’

The temptation to view someone’s profile online is obvious. You want to make sure that you are not about to create the next ‘party central’ in the house that you manage and looking at a public Facebook profile could give you adequate warning as to what type of tenants may be moving into your property.

Consistency is the key

I for one do welcome the changes and the guidelines that the OPC have introduced. It gives greater clarity and we are better able to perform our role with the knowledge that we need. Yes, it will lengthen the application process but as long as it is being consistently managed and is the same for private landlords as well as property management companies, then it has my full support.


Property Management and living with COVID

How the Property Management industry may have to adapt and change the way we operate in an environment with COVID

On the 17th of March 2020, I featured in an article published by the New Zealand Herald. I made the call in my monthly blog that all routine inspections of rental properties need to be postponed. As we watched from afar as the world was struggling to contain this outbreak, New Zealand was just at the cusp of starting to have to deal with the pandemic. The Government had just announced that anyone entering New Zealand had to self isolate on arrival and we had a total of just 8 cases in the country. However, watching events unfold around the world and especially after talking with family in the UK, I was convinced that New Zealand was going to face the same fate.

This is what prompted me to approach the New Zealand Herald. I felt that our industry could become a super spreader. Areas, such as South Auckland, were potentially at significant risk due to the demographics of the population and that many homes may have issues with overcrowding. I had worked out that Property Managers would be entering roughly 60,000 to 70,000 homes a month nationwide and due to the nature of the job, they could easily spread the virus throughout their communities in which they worked.

I was well used to people commenting on my articles and disagreeing with my views, but I was not prepared for the backlash I received from this article. I got hammered on social media. People emailed me and messaged me telling me to keep my mouth shut and others claimed I was creating panic and scaremongering. Exactly eight days later, the country entered into a lockdown and all the criticism I had received seemed to be forgotten about.

One of the main factors that most people were concerned about was the fact that by not doing property inspections, we were exposing our landlords to risk through failing to comply with landlord insurance policies. Most policies state that to be able to make a claim, you have to carry out 3 monthly inspections. My argument was based on two points, one being ethically responsible to our workers and the community and the other arguing that by carrying out routine inspections, we could breach aspects of the Health and Safety at Work Act by failing to take necessary steps to minimize risk. I also felt that any insurance company that failed to honour a claim due to a property not being inspected under such an environment would face intense criticism and common sense would prevail. In the end, common sense did prevail with the Insurance Council of New Zealand announcing a statement in June of 2020 that assured landlords and property managers that by not inspecting a property under relevant COVID Alert levels would not result in claims being declined.

Since the early days of the pandemic, so much has changed however now, there is a real sense of deja-vu. I am no scientist but I very much like to analyse data and I can see that elimination is simply not a long term solution. At some point in time, we have to open our borders. Even if we somehow do contain this outbreak, at some point we will all have to get used to living and working with COVID in our communities.

What will it mean for our workforce?

I am of the opinion that the only viable solution to overcome the issues that the country faces is to have as many people vaccinated as possible and then gradually open up the border. At some point in time, in a post MIQ world, COVID will enter the country. For those who choose not to have the vaccine, life could become more complex. There will be restrictions on what they can and cannot do and this will likely affect people’s employment. For example, I would have absolutely no issue if employers started to demand that people working with the public are fully vaccinated otherwise they cannot carry out their duties due to the risk they pose to their colleagues and to the public. Section 30 of the Health and Safety at Work Act refers to management of risk. This talks about eliminating risk where it is reasonably practicable to do so and if you cannot eliminate the risk then it should be minimized.

The question we need to ask ourselves is whether it is ethical for an unvaccinated property manager to walk into the 10 properties every week carrying out viewings, inspections and dealing with the public at large? I am of the view that a tenant could be well within their rights to ask for an assurance that the property manager scheduled to carry out the inspection or a maintenance contractor scheduled to carry out work be fully vaccinated. A tenant can make reasonable conditions to the property manager in regards to the right of the property manager to enter the property. Defining reasonable is never easy, but in this case, asking whether a stranger who is going to walk around the property, opening cupboards and touching surfaces is vaccinated is a reasonable request.

And then you have to think about the work colleagues. Would you feel comfortable sharing an office with someone who simply refuses to get vaccinated?

If a property manager simply refuses to get vaccinated, then, the employer has a tough decision to make. If I end the employment relationship due to the inability of the employee to carry out reasonable duties, am I breaching the Human Rights Act or does the wider safety of the team and the Health and Safety at Work Act overrule this. I will leave that argument to the lawyers but for my two cents worth, the safety of the team should always overrule the requirements of the individual.

What we are seeing in places such as the States are employers making strict demands on mandatory testing and mask wearing for employees who refuse to get the jab. In short, get the vaccine or get another job.

Change the rules – inspection rules outdated and no longer fit for purpose

Looking at how our industry operates, we must seriously consider whether doing three monthly inspections is a constructive and productive use of our time. Yes, properties do need inspections however, as we get used to living with COVID and as more and more people rent for longer periods of time, is it really necessary to inspect a property every three months? The stance that insurance companies take is that all tenancies are exactly the same. Clearly, they are not. With the use of technology and measuring how a property performs, surely we can develop a more tailored solution to landlord insurance instead of taking a ‘one size fits all’ approach. In a recent Real Landlord Insurance newsletter, they answer questions on how their landlord policy works. Their view is that ‘Inspections done remotely by video are not acceptable for insurance purposes. With a personal visit you use all of your senses, ie; sight, sound, smell and touch to determine the condition of the property’.

I see so many flaws with this approach. A routine inspection lasts roughly 20 minutes. If I do four inspections in a twelve month period, I am actually in the property for a little over an hour over the year. Last time I looked at the Residential Tenancies Act, it is the tenants responsibility to report damage as soon as possible. If a tenant fails to do this, then they should be taking on the liability. In regards to sight and sound, you’ll get this from a remote video inspection. Devices such as Tether have a role to play by identifying increases in moisture content and Co2 emissions.

Inspections should be less frequent but more in depth, focusing more on the performance of a property and improving its efficiency. More emphasis should be placed on the tenant in regards to reporting maintenance and using tools such as Tapi offer huge benefits to this.

Tenants will be living in the same rental properties for years and the three-monthly inspection should become a thing of the past.

Our property managers will become asset managers acting as consultants to landlords and provide a concierge service to their tenants. So much more can be done and should be done remotely. This does not mean that we spend the rest of our days in a bubble. It is about adapting to a world that has drastically changed in the last 18 months.

Keep safe, stay positive and look after each other.

David Faulkner


Rent Default Rate for Business Owners and Department Managers

Survey Number 2 Results available and Survey Number 3 now open

We have the results in from our second Rent Default survey. Results are a lot more positive and Property Management companies are suggesting that the first survey results will not be as bad as first thought. There is a big drop in what companies believe rent arrears will eventually reach during the crisis. In our first survey, it was close to 20%. But, as Government support packages have kicked in and the initial panic of the lockdown has settled, Property Management businesses appear to be a lot more confident moving forward.

This is positive news.

Currently, of the companies who completed the survey, the results sit at 4.57% of tenants are in arrears. Companies are projecting that arrears will only reach a peak of 7%, a huge drop from our first survey.

 

A word of warning, however. Once Government support in wage subsidies runs out, we may then see a slow but steady increase in rent arrears going forward.

We will conduct the survey again as we move into Level 3.