Q

We are in the process of terminating our agreement with our property manager as we believe he is not acting in our best interests. We are moving to another property manager. Despite several requests our current property manager refuses to supply us (as the owner) with a copy of the current tenancy agreement and contact details of the tenant.

He advised us that “we have no choice in this matter and we have to accept it”. He says he will only supply this information to our new property manager at a time closer to the termination of our agreement with him. As our property manager does he have a legal obligation to supply us with information?

A

Your property manager appears to acknowledge that he is losing the management of your property, and yet he refuses to pass any information to you about the tenancy. This is strange because as your agent he answers to you, not to your nominated replacement property manager. It is your prerogative to choose your property manager. If you had chosen to self-manage, then your current property manager would have to hand over the tenancy details to you. I see no difference between that and your current situation when you are the conduit to the new property manager. - Bernard Parker

Q

Insurance confusion

I work as a lawn mowing contractor and I have Public Liability Insurance with AMI. I mow a lot of rental properties. I broke a $1000 window at a rental property the other day while line trimming (just an accident – no negligence) and I thought I would be covered by my insurance. But my insurance company informed me my insurance would not cover this as it was the owner’s responsibility. They cited the Holler vs Osaki case. Tenancy Services also says it is the owner’s responsibility, citing the same case. The property management company disagrees with this and says I am liable as I am a contractor and my insurer needs to come to the party. Who is correct?

A

Firstly, the Holler vs Osaki decision has no application in this situation as the lawn-mowing contractor was not a tenant in the owner’s building. Secondly, the fact that you may not be legally liable is not a valid reason to decline your public liability claim. The claim should be accepted if your alleged legal liability is of the type covered under the policy (which is likely). If you weren’t negligent, the policy provides cover for your legal defence costs to defend the allegation if it is pursued. - Myles Noble

Q

Sell, invest or hold?
We live in Hawke's Bay. Because of the hot property market at the moment we are looking at selling our rental property. It is freehold, valued at around $350,000 and returning $330 per week. We are both working and live in a rent-free house on a farm. We are thinking we would like to buy a holiday home in Taupo and rent it out for casual holiday stays. We are unsure if this is the best option – or would we be better off putting the money into the bank and getting interest off the $350,000?

A

You need to make a call on what you think will happen to house prices over time in the area where your rental property is situated. If it is an area where you are likely to continue to get growth then hanging onto the property seems a better idea. This would mean you avoid sales costs. Also, with interest rates being so low you need to consider that the returns are not likely to be that attractive. On the other hand, if you feel like prices could be about to fall and you are taking more of a short term approach to this then selling might make some sense. - Kris Pedersen

Q

Pet-friendly verbal agreement
Our written tenancy agreement says no pets. The landlord has, however, given a verbal and informal written (email through his property manager and a phone call) permission for us to move into the house with our two cats. If things turn sour, and they want the cats gone – what kind of standing do we have? Obviously, we don’t want to get rid of the cats but we want to know how contradictory tenancy and verbal agreements would work in this scenario.

A

Where the landlord and tenant have entered into a tenancy agreement but then agree to change the terms of that agreement, the Residential Tenancies Act requires the variation to be in writing and be signed by the landlord and tenant. However, the Act also states that no agreement, or renewal or variation of an agreement, is unenforceable merely on the grounds that it is not in writing. The Ministry advises that all variations be in writing. Where the parties have agreed to vary the contract verbally it is best practice to then record the change in writing, as soon as possible. Both the landlord and tenant should sign the changes.

The changes can be in the form of a separate document or can be added to both the landlord’s and tenant’s copy of the tenancy agreement. Should a dispute arise about whether the parties had agreed to vary a clause in a tenancy agreement the Tenancy Tribunal would have jurisdiction to decide, on the balance of probability, on what terms the parties had agreed. It should also be noted that email is recognised as a valid form of written correspondence under the Act, so we would advise that you keep a copy of the owner’s email for your records. - Allan Galloway

Q

Do-up sale tax rules
If we sell a house that we have fixed up (which is not the one that in which we live), what are our tax obligations? Do we have to have a company to write off any expense to fix it up?

A

The law is quite clear on this point. If you acquired the property with an intention to dispose of it any gain derived is taxable. There are exemptions if the home is the residence of the taxpayer but this will not apply in your example. You are entitled to deductions for the costs incurred in fixing it up along with holding costs of interest, rates and insurance – plus costs of disposal like agents’ fees are legal costs.

The taxing provisions on acquisition with intention to dispose apply regardless of how long you have owned it – ie: they can still tax a gain even if the timeframe falls outside the new two year bright line test. The rules and allowable deductions apply regardless of what entity owns the property. Also note that if this activity becomes continuous and regular you must also register for GST. - Mark Withers