Managing owners' expectations who are returning to their rental property

There is a journey that plays out from the start of signing up and taking on the management of a rental property, through to when the owner may eventually decide to sell or in many cases recently, due to the COVID-19 situation, move back in.

We need to clarify that investors who rent out properties with no intention to ever live in them, often have little or no emotional attachment to the “business”. However, for a homeowner who has a lifetime of memories or has painstakingly renovated or improved their family home, deciding to rent it for what can be a number of reasons (change in employment, personal circumstances etc.), it can be a very emotional time.

We are going to focus on homeowners returning to their properties. It’s very difficult to prepare an owner for the real possibility that there will be wear and tear and damage from the usual daily living activities of tenants.

It is important to set realistic expectations with owners about fair wear and tear, along with the Tenancy Tribunal’s interpretation of reasonably clean. Reasonably clean means clean to a standard that an average, reasonable bystander would consider clean.

A reasonable state of cleanliness does not mean, for example, spotless, commercially clean, a full spring clean or a hotel/motel standard clean. Right at the outset of your business relationship with the owner of the home, you need to be clear about this. It is common for issues to arise, particularly if the owners are having a full professional clean done of the premises prior to the tenancy (including carpets) and are expecting the same from the tenants when they vacate.

Anecdotally, we are hearing of less than around 20% of handovers of property back to owners, where there are no issues. Inevitably, there is something that the owner feels lands in that space of more than fair wear and tear. That could range from marks on polished floors, the oven not being clean enough, the carpets not being clean enough, or the garden not being in the same condition as it was originally.

In many states in Australia, they have a bond clean requirement for tenants that is built-in to the vacate process and details included in the Tenancy Agreement at the time of signing. At the exit inspection, the tenant has to prove with receipts they have had the carpets cleaned to a certain standard and a professional cleaner through the property. This would most definitely remove most disagreements about cleaning; however, it is important to note that this is not enforceable in New Zealand.

MBIE – Tenancy Services released statistics relating to the period October – December 2020, showing there were more than 490 applications to the Tenancy Tribunal by tenants in relation to the bond.

It is not uncommon to still see clauses in Tenancy Agreements that are unenforceable, for example, tenants having to commercially clean the carpets at the end of the tenancy, or additional bond being charged for a pet that exceeds 4 weeks rent in total. The landlord or the property manager could be fined exemplary damages for including an unenforceable clause in their Tenancy Agreement.

Until such times as we have a rule change or clearer guidance on the term ‘reasonably clean’, landlords should be well informed about the current position with exit cleaning. In some cases, property managers ask landlords to allocate funds for further cleaning once the tenant has finished with their obligations.

As long as the property continues to be a rental property (i.e. is tenanted again afterwards), then the expense is deductible to the property owner. This is one way to ensure that the general condition of the property does not go backwards.

Jo Rae

Head of Property Management, REINZ