Authors: Jo Rae, Head of Property Management, REINZ and Melisa
Beight, General Counsel, REINZ
From the regulation of residential property management, an update on Healthy Homes Standards, family violence regulations and our submissions on methamphetamine contamination — it’s all go in the property management sector.
On February 21, The Right Honourable Chris Hipkins published his Prime Minister’s Statement for 2023 — showing the government’s strategy to refocus on education, health, housing, keeping communities and businesses safe and accelerating the economic recovery by laying foundations for the future.
Most of you will know that REINZ’s focus has been advocating and lobbying for the regulation of residential property managers. We are hopeful that under this government’s term the Bill will be introduced and come into effect.
We are anticipating the select committee to report back — after receiving public submissions — in early 2024 with the new legislation completing its passage by mid-2024, commencing mid-2025. The legislation will become enforceable 12 months from its royal assent date to allow time for all parties captured by the legislation to meet the new licensing requirements. This means that all provisions (including any required regulations) are likely to come into force in 2026.
The current proposal
It has been proposed that the Real Estate Authority will be the regulator for the residential property management sector.
It will set fees and levies before the regulations come into force in 2026 and oversee a process for dealing with complaints regarding property managers, not unlike the arrangement currently in place governing the conduct of real estate licensees.
Under the draft regulations, when a property manager’s actions have been deemed as unsatisfactory conduct, the property manager may be required to pay a fine up to $10,000 for an individual, or $20,000 for an organisation. Misconduct will incur fines at a higher level of $15,000 for an individual and $30,000 for an organisation. A ‘no wrongdoer’ approach will be implemented for complaints, meaning complaints can be made via the Disciplinary Tribunal or the complaints authority.
The Bill will also provide for criminal offences and penalties of up to $40,000 for an individual and $100,000 for an organisation if they are found guilty of more serious offences, such as providing false or misleading information, failing to produce financial records, and acting in contempt of the court.
Proposed licensing structure
The proposal is for a tiered licensing structure for both residential property management individuals and organisations requiring them to meet specific training, experience and practice requirements depending on the licence class they are in. Once you have a licence issued by the regulator, this will be published on a public register.
Proposed licensing classes
There are several licensing classes being proposed under the framework, depending on the skillset of the residential property manager.
- Those who haven't had the opportunity to gain work experience may be required to obtain a provisional licence with working restrictions, such as working under the supervision of a fully licensed property manager. There will likely be a requirement for ongoing CPD, a proposal that REINZ supports.
- There is likely to be a licensed residential property manager class, where property managers are able to practice while employed by a licensed residential property management organisation. This class of property managers will likely need to have at least six months of vocational experience, intermediate training (for example, a five-day course) and ongoing CPD.
- The licensed supervisory property manager class can supervise provisional residential property managers and manage property management organisations. This class is likely to require at least 18 months’ vocational experience and an NZ Certificate in Property Management (Level 4). Again, ongoing CPD will be a requirement.
- Licensed residential property management organisations can employ or contract licensed residential property managers and offer property management services. The organisation will be assessed under a fit and proper person test and they will need to operate within a code of conduct and abide by industry standards.
The REA will have the discretion to recognise the prior learning and experience of property managers, meaning they may not have to undertake any additional learning schemes.
Further requirements for residential property managers:
- CPD — exact requirements yet to be confirmed
- Client funds to be held in an audited trust account
- Property management organisation needs to hold appropriate insurance
- Need to satisfy a ‘Fit and Proper Person’ test
- Need to abide by a code of conduct.
So, what is not in the scope of the proposals?
Kāinga Ora, Community Housing Providers and private landlords’ actions do not fall under the scope of regulation. The current view is that the increased enforcement powers and penalties for large-scale landlords (with six or more properties) that came in through the Residential Tenancies Act (RTA) Amendment Act in February 2022, should be allowed to bed-in with the current proposed regulation before further regulation of private landlords is considered.
An update on Healthy Homes Standards
The Government extended the timeframe to comply with the Healthy Homes Standards for landlords of private rentals, Kāinga Ora and Community Housing Providers who have not yet been required to comply:
- For private rentals, the timeframe for compliance for a new or renewed tenancy shifts from 90 days to 120 days
- The final date by which all landlords of private rentals must comply shifts from 1 July 2024 to 1 July 2025
- For Kāinga Ora and Community Housing Providers, the timeframe for compliance shifts from 1 July 2023 to the new date of 1 July 2024.
These changes in compliance timeframes apply to private rentals that were not required to comply before 26 November 2022. This means, if the tenancy started or renewed on or after 28 August 2022, the landlord now has 120 days to comply with the Healthy Homes standards.
Family Violence regulations
The new notice period giving a tenant experiencing family violence the right to terminate a tenancy by providing two days’ written notice is now in effect. The Ministry of Housing and Urban Development last year, issued regulations detailing the type of evidence the tenant is required to provide when giving the landlord or property manager notice.
The type of qualifying evidence includes:
- A statutory declaration made by the withdrawing tenant
- A written statement or statutory declaration made by a prescribed person, such as a medical practitioner, nurse, midwife, social worker, or counsellor
- A copy of a Policy Safety Order
- A copy of a charging document relating to family violence against the withdrawing tenant
- A copy of the first page of a Protection Order issued during the tenancy
- A copy of the first page of a Protection Order issued before the tenancy, accompanied by a written statement from the withdrawing tenant.
Tenancy Services has also published an approved form for family violence withdrawal notice for property managers and landlords to utilise.
We understand that these regulations have yet to be tried and tested in the Tenancy Tribunal, and those residential property management members amongst you will have many questions about how the regulations work in regard to privacy law and complex situations where there may be flatmates.
Considering the new regulations being published last year, REINZ is working to publish further information on these provisions.
Methamphetamine contamination regulations
We have submitted formal submissions to Te Tūāpapa Kura Kāinga - The Ministry of Housing and Urban Development’s (HUD) Methamphetamine Consultation Team in support of the Ministry’s proposal to regulate methamphetamine contamination in rental housing.
Having two ‘acceptable’ levels of methamphetamine contamination has led to widespread confusion in the residential property management industry, particularly in terms of when a landlord’s decontamination obligations are triggered and whether a tenant in contaminated premises has any termination rights.
The Ministry’s proposal provides for a single maximum acceptable level of contamination of 15μg/100cm2. If detailed assessment tests show levels over this, the property is ‘contaminated’ and must be decontaminated to a level that tests at or below 15μg/100cm2.
Considering the widespread industry confusion, REINZ supports the regulation of methamphetamine contamination in rental housing as it will provide much-needed clarity and certainty in terms of the parties’ obligations.
REINZ does not consider it appropriate to express a view as to what the maximum acceptable level and maximum inhabitable level should be set at as we are not experts in this specialised field. What is important is clarity and certainty around what level/s is. REINZ received 108+ responses to our members’ survey and members’ feedback have been incorporated in our submissions.
Landlords will only be required to test their property if the Police or relevant council believes methamphetamine has been manufactured at the property, or if a permitted screening test carried out by the tenant or any other person showed levels over 15μg/100cm2.
Tenants, or any other person, may choose to do an approved screening test on a rental property at their own cost. If the results are higher than 15μg/100cm2, the landlord must ensure a detailed assessment test is carried out by a suitably qualified professional. If the results are still higher than 15μg/100cm2, the landlord must ensure the property is decontaminated as soon as practicable. Cleaning can be done by anyone so long as they follow the prescribed process. Once cleaning is complete it must be retested by a suitably qualified person. The person doing the cleaning and the testing cannot be the same person.
If detailed tests show levels above this, in certain circumstances the tenancy may be terminated by either party. If the tenant is not in breach, rent will abate at the point of contamination.
REINZ’s submissions on the methamphetamine regulations can be found in our Resource Library.
Regulation of residential property managers
For a Bill to become legislation, it passes through several formal stages. From its first reading at Parliament, if it passes, it will then proceed to the select committee stage. At the select committee stage, REINZ will provide further feedback on the Bill, specifically on the drafting of the regulations.
This article was originally published in the autumn/winter 23 edition of Real Estate.