10 Warning Signs It’s Time to Change Property Managers
Having an investment property is a great investment and long term financial plan. Ensuring you have a good team assisting with the set up and management of this investment is the key to success.
A good financial planner, accountant and property manager are the 3 essential services you will need to develop a trusting relationship with.
Generally you would have the same accountant and financial planner throughout the term of your investment but depending on your property management agency, you may have several points of contact or staff changes for property management.
In this case, how do you know that your property is being monitored correctly?
Transparency should be the first check. Do you have access to your files? Are new leases, certificates and other documents sent to you regularly?
In my 16 years as a property manager, I have audited hundreds of files from other agents. Here are the most common mistakes and errors that could not only cost you but can expose you to legal ramifications or fines.
10 WARNING SIGNS!
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Not providing documents to owners
Transparency should be the first check. Do you have access to your files? Are new leases, certificates and other documents sent to you regularly?
If not, then you will need to contact your property manager to ask for the following documents.
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Entry Condition Report not being signed, completed or incorrect
An Entry Condition Report is the reflection of the condition of a property at the start of the tenancy and the document that is referred to at the end of the tenancy. Having this document correctly completed is essential.
To check your report, ensure you read all of the comments by the agent and the tenant.
Check that the agent has signed the report, and ideally the tenant as well.
If there is no signature by the tenant, then the tenant has not returned their copy off the Entry Condition Report on time. A note should state this in the file to prevent issues during the bond process.
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Smoke alarm testing outside allowed period
It is a legal responsibility to have the smoke alarms tested within 30 days of a new lease or a lease renewal beginning. Queensland Fire and Emergency Services can issue a fine for not having these tested within the correct time-frame. Testing outside of the allowed period may also nullify any insurance claims should there be a fire at the property.
To check this, ensure the smoke alarm test date is within 30 days of the lease start date.
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Unlawful clauses in lease agreements
Contracting outside the law is a legal term many courts use when issuing fines to property managers or owners that do not adhere to the laws of leasing in Queensland.
Items such as the following are examples I have come across that have been illegally added to a lease and can cost you in fines and legal representation:
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- “if the dishwasher breaks down it will not be repaired”
- “Tenants agree to give 1 months notice in writing to leave”
- “Tenant agrees to pay for smoke alarm testing at the start of the tenancy”
- “If rent is not paid on time, a fee of $10.00 will be applicable”.
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Leases not renewed
Do you have a firm lease in place? Did you know that some insurance policies will only cover rent loss if there is a fixed term lease agreement?
If your property manager has not renewed the lease (according to your instructions), this means that the tenancy moves into a periodic agreement. This type of agreement allows tenants to leave giving just 2 weeks notice and may cause issues should there be an insurance claim at the property.
Make sure your lease is a fixed term agreement unless specifically arranged with your property manager.
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Inspection reports not being completed
Inspections must be completed at a minimum of every 6 months or as agreed in writing on your Form 6 authority form.
Generally inspections are carried out every 3-4 months unless there are long term tenants in place or perhaps a family member. If inspections are not completed at least every 6 months this may affect any insurance claims.
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Application forms not complete
When an insurance claim is made at the property, one of the first documents asked for is the application form. Insurers will need to make sure your agent has done every check available on the tenants. No records or having an incomplete application form could jeopardise your insurance claim.
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Bonds not being increased
The bond on any property in Queensland should be the equivalent of 4 weeks rent. This is a Queensland standard and important to note that all insurance companies know this.
If your property manager has failed to increase the bond (generally after a rent increase), the insurance company will calculate the claim based on the Queensland standard, not the amount held. Depending on the shortfall of Bond money, this could be around a $100 difference.
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No key documentation
A photocopy of the keys should be provided to the tenants and kept on file to compare the set of keys returned at the end of the tenancy. Without this receipt, keys may need to be cut and copied or even locks changed.
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Incorrect commissions being charged
For this, you need to refer to your Form 6 or the old PAMD 22a.
This form should show clearly what your agent will charge you and when. Any fees or charges that are not on this form can not be charged and should be refunded to you.
It is a legal obligation to ensure you have received a copy of the Form 6. If you have not received this or are unsure if you have one in place, please contact us.
If you are unsure of these documents/processes and would like us to audit your files on your behalf, please contact us for a free 15 minute consultation.