EPMEPM: Best Practice & Legislation

Overcoming Owner Objections

AS A PROPERTY MANAGER, you’re almost always likely to face questions or objections from the owner of the property. Whether it’s for routine maintenance, emergency repairs, lease renewals or property vacancies, you need to know what you’re talking about so you can be sure you’re giving the property’s owner the right advice. Story by Lauren Kropp.

OVER THE LAST decade property management has become much harder and more time-consuming; legislation has changed and litigation seems to be the answer for even minor disputes.

The first lease I prepared was in 1997. It was typed on a typewriter with carbon copies; there were no such things as inventories, CMAs or online bookings. If someone had told me that in 18 years’ time we would be arranging for smoke alarms to be checked for every new lease, I don’t think I would have believed them.

And it’s not just me. Owners are also having trouble understanding the changes. When it comes to legislative items such as smoke alarm checks, blind compliance and pool certificates, the simplest way to explain is that landlords simply do not have a choice. If an owner refuses to comply, as a managing agent, you must cease management of the property to ensure you don’t end up at tribunal yourself.

My advice for you, as a manager, is to include this explanation in a monthly or quarterly newsletter, or as a note on all owners’ statements – something along the lines of ‘You may notice additional charges appearing on your statements over the coming months for smoke alarm servicing. These are legislative requirements and must be performed. Please see attached information.’

Other objections or issues you might face with property owners include:

SIGNING OF A FORM 6
It bewilders me that when it comes to due diligence there are still agencies that do not have a signed copy of either a 20A or a Form 6 on file; not even just a scanned copy. The rules are the same – without a signed copy you must immediately give the property to the owner to self-manage.

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 period you have acted without a signed agreement. You will have to refund all fees collected back to the landlord and potentially face a heavy fine.

MAINTENANCE
Dealing with tenant maintenance requests that are not urgent is always difficult. Each landlord will view these maintenance items differently and this is by far the toughest item to be agreed on. Although there is a lovely little section in the management agreement where the landlord indicates they agree for you to spend $500 or two weeks’ rent (for example), I strongly doubt they would be happy if you spent $450 on general repairs that may not have been urgent. That’s when the phone call comes in; 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. Many landlords will not find this answer acceptable.

In short there are two types of landlords.

  1. Mr and Mrs ‘We appreciate your looking after our home as if it is yours’; and
  2. ‘Pay me the rent so I can pay my mortgage and that’s all I care about.’

Type 1 will appreciate you are trying to keep the property well maintained, making the tenants comfortable so they remain great tenants, paying their rent on time and living at the property as long as possible. And the tenants will understand the landlord’s willingness to carry out repairs means the $10 rent increase is justifiable.

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 two-year period. The best way to approach this situation is to advise them the repairs are needed to avoid any unnecessary disputes and to mention that upon lease renewal you may look at increasing the rent so that the notion of more income is a key focus. Don’t make promises though, as a rent rise may not be possible. You may also need to remind this owner that part of your job as managing agent is to maintain the property for the landlord’s benefit as well.

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 and 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, and so on).

Owners need to feel their lease renewal fee is warranted. So what do they get for it?

Financial security: No insurance issues. Aside from industry insurers like AON, EBM, Terri Scheer, many insurance companies do not cover landlord insurance if tenants are on periodic leases.

Rent increases: These can be written into leases, so there is nothing wrong with increasing rent after 6 months on a 12-month lease.

Property vacancies: Some owners expect you to find them a tenant a day after the previous one 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 and ensure any maintenance is carried out. This should be explained to the owner by the BDM when signing the management agreement. When properties can’t be rented, the cause could be that the rent is too high, or a property has been listed prior to four weeks from vacate date and has become stale. Because the average person needs to give two weeks’ notice to vacate, it’s best to advertise within those two weeks so immediate moving is available.

The property manager or leasing consultant will perform the CMA and advise the owner what they feel would be an achievable rent. If an owner is insisting on a higher rent, you might agree to try the increased price for two weeks to see if any interest is generated. If not, talk to the owner about dropping the rent back down again. Owners might see a big difference in the $450 rent they want, compared to the $430 a week rent you have suggested, but if the property is vacant due to the cost, they are losing more money than they will gain.

In the end, the most important way to avoid objections is the sign-up process. Be sure to advise both the owner and the tenant of your systems and procedures from the start; that way you can resolve a lot of problems at a later date. Sign-ups might take longer, but you’ll save on irate phone calls well into the future.

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