Uncontrolled Property Managers Concerns
Proliferation Of Uncontrolled Property Managers A Concern – Real Estate Institute
The Government should act to deal with a proliferation of unlicensed property managers, according to the Real Estate Institute.
The number of unlicensed property managers, who are managing rental properties, is snowballing and creating risks for those who deal with them, Real Estate Institute of New Zealand (Inc), National President, Mr Graeme Woodley said today.
“These unlicensed property managers are a growing concern because they are cutting corners and taking advantage of loopholes in the law which enable them to compete with licensed property managers, without the compliance requirements which are specifically there to protect the public. This is putting those who are governed by the Real Estate Agents Act at an unfair disadvantage and creating unnecessary risks.”
Mr Woodley said the Real Estate Institute had previously drawn this anomaly to the attention of the Government and understood the Government was concerned about it. The Institute intended to talk further to the Government about the problem and had already discussed the issue with Tenancy Services.
“What you have are unlicensed people, often with no training or experience, setting themselves up as managers and conducting business outside of the requirements of the Real Estate Agents Act, without the backing of the Fidelity Fund or running a proper audited Trust Account.
“The Real Estate Agents Act requires anyone who wants to run a property management business, leasing and renting properties on behalf of owners, to have a registered sales person who has to be under the control of a licensee, to have a Trust Account for correct handling of funds, to contribute to the Real Estate Institute’s Fidelity Fund, and to have frequent audits to ensure everything is carried out correctly.
“These unlicensed people have a view that they can get around the law by not charging an agents fee, but what they are doing is bundling the fee into their other charges, so the tenants finish up paying anyway, through higher rentals.
The Real Estate Agents Act 1976 affords significant public protection, which the Institute does not want to see eroded. The practice of bypassing the requirements of the Act means the public is unprotected, missing out not only on the Fidelity Fund protection and the requirements relating to Trust Accounts, but also on the educational and professional development requirements, and the licensing and disciplinary procedures governing members of the Real Estate Institute.
Mr Woodley said he knew of unlicensed property managers who owned their own properties, managed properties on behalf of other owners and simply combined the rent from all the properties into one account from which they were servicing the debt for their own rental investment properties.
“Compare that with a member of the Real Estate Institute who has anything up to half a million dollars in a Trust Account, which he or she can’t, and of course shouldn’t, touch, and has to spend anything up to $6000 a year on an auditor for the Trust Account.
“I also know of recent cases where these unlicensed managers have been approached by clients to sell a property, the manager has nominated a value which has been accepted by the client in good faith, and then the manager has sold the property a month later at a profit.
“That sort of behavior would not
be tolerated by the Real Estate Institute and is not
permitted under the Act. But because the unlicensed property
manager is not subject to the Real Estate Agents Act, the
client has no comeback at all.”