Frank Newman: Perils of being a landlord

The term Land-lord has an aristocrat resonance about it. The reality is there is nothing easy about being a landlord. For most it’s a rude awakening into aspects of human behaviour that most prefer not to associate with. 

The NZ Herald (Diana Clement, 3 May) ran an interesting article recently about the perils of being a landlord. Here are some key points.

The most common complaints or frustrations from landlords were:

• Not getting paid! In 2013 there were 45,093 applications nationwide to the Tenancy Tribunal. 41,496 or 92% were from landlords. The other 8% (3,597) were filed by tenants. Most of the applications filed by landlords were for rent arrears (61%). Given there are about 500,000 rental units in New Zealand, in any year one in 18 landlords (about 6%) suffer arrears that are significant enough to warrant the matter being referred to the Tenancy Tribunal.
• Prospective tenants not keeping appointments to view the property.
• Smoking in the dwelling even though the tenants have accepted a non-smoking condition of tenancy (and then they will no doubt moan about the cost of having someone clean the tar from the ceiling and walls!).
• Keeping pets in a pet-free property. One property owner describes it this way. "Turning up to a property that you've let in pristine condition to find dog sh*t all over the yard, dog hair inside the house embedded in the carpet, scratch marks over the interior and exterior doors, a pervading smell of dog inside the property and burnt patches of grass where the dog has been peeing tends to make one think long and hard before re-renting to dog owners."
• Tenants who claim to have paid the rent but haven't. This shows the importance of providing receipts if rent is paid in cash (which is suspicious in itself as they may be using your premises to operate a “cash” business).
• Tenants who sublet the property without the landlord’s consent.
• Exceeding the maximum number of people permitted to live at the property, causing overcrowding and additional damage.
• Tenants leaving piles of rubbish and belongings when vacating.
• Tenants who don’t report problems, like leaking pipes and fittings that damage kitchen cabinets and floors. A lot of damage can be done between inspections.
• The problems often continue once the problem tenants have gone. Enforcing debts after judgement is hugely bureaucratic, often with little to show for it or repayment in small amounts over a very long time.

One does not have to be Einstein to work out that the main problems within the rental sector are to do with bad tenants rather than bad landlords. It’s an issue that could be sorted if the regulators that are so keen to come down hard on landlords, came down hard on tenants.

Some people avoid all of these problems by having a property manager look after their investment. That too is not without its frustrations, but that’s another story.

KiwiSaver

Last week the Labour Party announced it would introduce changes to KiwiSaver, should it be in control come 20 September. It is no surprise that further changes are in store for KiwiSaver – it’s far too big for politicians to ignore.

Labour’s scheme is to:

• Make KiwiSaver compulsory for wage and salary earners. It would be optional for the self-employed.
• Employee contributions would progressively increase from 3% currently to 4½%. This would be matched by the employer, so the savings contributions would be 9% in total.
• The Reserve Bank would be given the power to vary the KiwiSaver contribution rate as an alternative to increasing or decreasing interest rates via the Official Cash Rate.

In my view New Zealanders are so bad at saving, particularly those who most need to save, that compulsion is the only way to create a reservoir of savings. So many people are already members that making it compulsory is no big deal anyway. The real benefits of the scheme come with time. Within another decade the savings pool would be big enough to funds the things that are financed by offshore capital at present (25% of all mortgage lending for example is financed from offshore). The danger for employers is that they alone will be called upon to make the bulk of the contributions in the future, something no doubt the anti-business members of Parliament would be encouraging.