Have you recently bought a rental property and wondering whether to employ a property manager, or whether you’ll manage it yourself? Here’s a look at the basic legal requirements you need to be aware of and how a property manager can help manage this for you.
What are your legal obligations as a self-managing landlord?
As a landlord you are obliged to follow the regulations set out in the Landlord-Tenant Law. This was created as a blueprint for the interactions, rights and obligations of both landlords and tenants. While each state and territory’s laws vary slightly there are five basic obligations that every landlord must follow:
Disclosure of owner
Delivering possession of the unity
The property must be compliant with local regulations such as smoke alarm installations, pools, water efficiency and blind cords.
Legal obligation to manage the bond or security deposit
A key obligation of every landlord is the management of the tenant’s security bond. Every landlord has the right to charge their tenant a bond. This security deposit is held in trust and acts as security in case your tenant fails to pay rent, damages your property or breaches the lease agreement.
You are obliged to follow your state laws with regards to the maximum amount of security deposit you can charge, where it must be stored and how it should be refunded to your tenant at the end of the lease. The management of security bonds can cause issues between tenants and landlords if expectations are not managed properly.
Property managers are experts at dealing with issues that can arise around bond refund. They carefully manage the condition report process and ensure that both the tenant and landlord agree to the state of the property before the tenant moves in. This along with regular inspections conducted by trained property managers all help to ensure there are no ‘surprises’ at the end of the lease and all maintenance and damage issues are addressed when and where they happen.
Disclosure of owners details
The landlord must legally provide the tenant with certain information about the owner of the property. They must provide in writing the name and address of individuals who will manage the building, collect rent, make repairs and address any complaints. If you use a property manager, their details would be provided keeping the landlord one step removed from the tenant which is preferable to many investors.
Management of maintenance issues
Any maintenance issues with a self-managed property is the responsibility of the landlord. The landlord must adhere to all building codes, perform necessary repairs in a timely manner, maintain common areas, ensure there is a supply of running water, ensure the plumbing, electricity and heating all work, that there is an appropriate place for garbage and they must be contactable at all times of the day in case of an emergency.
Property manager take the stress out of this for landlords. They are the tenants go-to person when it comes to issues all hours of the day. Plus, due to their negotiating power with tradespeople they ensure their landlords get the best price and service on all maintenance jobs.
Obligations to limit liability
As the landlord you are legally obliged to adhere to the terms of the lease agreement (written or spoken) including:
The property must be safe for the purpose
Ensure all installations are working such as gas, electricity and heating
Installation and appliance maintenance and safety of landlord owned appliances
Treat potentially health threatening issues such as rising damp
Anything else that is stipulated in the lease agreement
Manage the refund of the security bond
Property managers are skilled at managing landlord’s legal obligations. More and more legislation comes out every year making it increasingly difficult for landlords to stay across the changes. If anything goes wrong you can end up with a fine or imprisonment. Having a property manager overseeing your investment and staying across all necessary changes on your behalf, is a wise decision.
Deciding on the appropriate rent
If you are managing the property yourself, you alone are determining how much rent you want to charge. As your rent contributes to your mortgage repayments, it’s realistic that you’ll want to obtain the best amount possible. To determine this it’s a good idea to research the market; what are other similar properties, in similar conditions in your local area charging. Make sure you consider what features your property has such as number of bedrooms, bathrooms, parking, backyard, laundry, etc, plus is it recently renovated or not. Look at the property through the eyes of a tenant and consider how much a reasonable person would pay. You don’t want to price yourself out of the market and you don’t want to under value your investment either.
There is a delicate balance between charging too little and too much. A skilled local property manager does this all the time. They are across what similar properties charge and are best suited to help you come up with the appropriate figure. Property managers are focused on ensuring you maximise your rental return and conduct annual rental appraisals to ensure you are always charging the highest possible rent and maximsing your rental yield.
A final note on Property Management fees
Some new investors are worried about the cost of property management and this is a hindrance to employing someone to look after their property. The good news is in most cases property management fees are tax deductible so the cost of employing someone with experience, to screen your tenants, manage the tenancy agreement, handle maintenance issues, stay across all legislative changes and who will help ensure you are maximising your rental return is extremely cost effective and a great service to many investors.