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Chapter 1: What major thefts have occurred in property management?
Hello and welcome along to the Property Academy podcast by Otis Partners. I'm your host, Stephen Knight.
I'm Andrew Nicholl.
And this is a show that helps Kiwis go from zero to five investment properties so you could be financially free and stick around for the next 15 minutes because you're going to learn the new laws coming in for property managers and how it impacts you, the property manager who silently stole $869,000 from landlords and tenants, and the five new rules that will have rogue property managers shaking in their boots.
Now, Andrew, there are some new laws that have now been announced that are coming in for property managers. And that's really important because there are some absolute cowboys out there.
Chapter 2: What new laws are being proposed for property managers?
Yeah. So let's talk about that property manager who was Ray White Henderson, who stole $92,000 from tenants. So he collected bonds, as you do as a property manager. And normally then what you do is you lodge them with tenancy services who kind of They're the custodians of that money. And then when your tenant leaves, that money gets paid back to them.
Chapter 3: How did a property manager steal $869,000 over 17 years?
Now, he didn't do that. He just kept the money. And when he put his company into liquidation later on, there was no money left to be able to pay out those bonds and they weren't with tenancy services. Now, the landlords and tenants go looking for their bonds. Where is it?
Where is it? It's not there.
And of course, that could be ages later, right? Because, you know, you might have moved your property to a different property manager, you're feeling a bit frustrated, and then the tenants leave six months later, well, there's no bond there.
And of course, I guess the landlord would be responsible for that.
Chapter 4: What changes are being made to protect landlords?
Well, in this case, in the end, Ray White head office paid out all of the tenants and good on them for doing that. But There was still a rogue property manager there, right, who was stealing money. Then I saw another case where an office worker at a property management firm stole $869,000 over 17 years. And again, this was mostly tenant bond money.
So this person's job was to transfer the bonds over to tenancy services and she'd do them in batches of kind of five to eight. But every batch, she'd just leave one off and direct it to her own account. How do you do that for 17 years and not get caught?
Chapter 5: What is the significance of the public register for property managers?
I mean, if I knew, I would be working in a property management company as an administrator. But here I am as a lowly podcast creator. And I think there is a big issue with some property managers, right? Yeah.
The main issue is that they handle other people's money, right? And there's not a whole lot of checks and rules about who can and can't be a property manager. And one barrister put it perfectly. He said, any cowboy can become a property manager. They're not subject to police check, licensing, or any regulatory oversight.
And so, you know, this isn't to say that property managers can't be trusted because 99.99% of them are awesome.
Chapter 6: What qualifications will be required for property managers?
They do the Lord's work. Oh, that's interesting. Where'd you get that stat from?
Yeah.
made it up. Yeah, just made it up. Well, there's nothing wrong with that. That's what it's 99.99. It's probably 99.97, Ed. But for the other 0.03%, you know, they could be wrong.
Chapter 7: How will client funds be better protected under new regulations?
Now, a lot of these money problems could be solved without having new laws written, right? We'll talk to you about what the laws are. But a lot of property managers have solved these issues already by having what's called an audited trust account.
So rather than mixing in tenant bond money and tenant rent money with all of the other business expenses and going into the same business account, they will have a separate account that is specifically designed for holding tenant money. It is audited. It's subject to more restrictions. And a lot of good property managers already have those.
But the trouble is that some rogue property managers don't have that. And that's where you get cases like this, where property managers are in a position where they can easily steal from landlords. And that's because property managers, I'm not sure if you knew this, Andrew, they collect $7 billion with a B, $7 billion a year in rent on behalf of landlords.
Chapter 8: When will these new laws for property managers take effect?
So there is a lot of opportunity for theft to go on. And I guess that's why all of these rules are about to change, right?
Yeah. So let's talk about what is going to change. So in late March, the Associate Housing Minister, Tama Potaka, announced the Residential Property Managers Registration Bill. And it's going to bring in six big changes that will have these rogue property managers shaking in their boots.
And I think there are probably of the six big changes, only about five of them are really interesting. So, you know, what are the big things that people who listen to the show will actually care about?
So number one is there's going to be a public register. So kind of like the FSPR, which registers all the financial advisors, you're going to be able to go online and see every property manager in their company that makes sure they're registered on there. Now, that might not sound like much, but it's more significant because then the government...
can control who is a property manager and who is not. So if you do something dodgy, like you don't follow the rules, then you can be taken off the register. And if you keep trying to be a property manager, you can be fined. And the fine can be up to $100,000. That's a lot, aye.
It's a bit of money. And what that means is like, if there was somebody rogue, like from this Ray White Henderson or whatever, if they get kicked off, you can't be a property manager for anyone. You can't just start up. Oh, I'm just a little sole trader. I'm not doing anything. No, you're managing properties, right? It's the same as like,
If you're a rogue lawyer and you get kicked off and you're not registered anymore, you can't just do, oh, well, I'm just a small lawyer doing a bit here and there. No, no, no, you can't be a lawyer.
Number two is there'll be minimum qualifications to get on that register. Now, we don't know what those education standards are yet, but good property managers train their teams already and they get them to do training and get formal certifications. And even though it's not required right now, they know that that's going to be part of the regulation in the future.
So in the future, you're not going to be able to just set up a property management company straight out of high school and then slap a logo on a website and Bob's your uncle.
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