Who fixes what in rental properties?

This article addresses the complications for property managers in seeking to contract out of their obligation to supervise and manage the repairs and maintenance of a rental property and to pass those tasks onto a third party.

Lessors have obligations, under section 185 of the Residential Tenancies and Rooming Accommodation Act 2008 (RTRAA), to ensure and maintain rental premises in a clean condition, fit for the tenant to live in, and in good repair.

Since 1 September 2023, lessors’ obligations under the RTRAA have been expanded in respect of new tenancies to require conformance with the prescribed Minimum Housing Standards,[1] which sets out standards of a rental property with respect to:

a.          sanitation, drainage, cleanliness and repair;

b.          ventilation and insulation;

c.          protection from dampness effects;

d.          construction conditions, structures, safety and situation of premises inclusions of facilities;

e.          the dimensions of the rooms;

f.           privacy and security;

g.          provision of water, storage and sanitary facilities;

h.          laundry and cooking facilities;

i.           lighting;

j.           freedom from vermin infestation;

k.          energy efficiency.

Typically, lessors have sought to pass some of the administration work associated with arranging necessary repairs and maintenance to their property managers.

Pursuant to section 104 of the Property Occupations Act 2014, the Property Occupations Form 6 must include:

a.        a prominent statement that the client should seek independent legal advice before signing the appointment;

b.        clarification as to whether it is a single, or continuing, appointment

c.         with respect to the management of rental properties, a statement as to:

i.          the service to be performed by the residential letting agent;

ii.         the fees, charges and commissions payable for the service;

iii.        when the fees, charges and commissions for the service become payable;

d.        the expenses which the agent is authorised to incur with respect to the performance of each service or category of service;

e.        the source and estimated amount or value of any rebate, discount or commission that the agent may receive for any expenses; and

f.         any condition, limitation, or restriction on the performance of the service. (our emphasis added) In order to regulate the obligations as to maintaining the rental property, the Form 6 contains a statement, in Part 8, on the fifth page, as to the maximum value of repairs and maintenance which might be paid or authorised by the agent without the prior approval by the lessor.

Having regard to the range of obligations now shouldered by lessors as to “Minimum Housing Standards”, and the costs and administration pressures on property managers, it is not surprising that lessors and property managers might seek to retain dedicated specialist contractors to attend to the repair and maintenance of rental properties.

Where difficulties may arise is if the lessor, the tenant and the property manager are unsure as to who has assumed responsibility for the maintenance of the property.

Enquiries have been made of the REIQ by property managers as to their position if the property manager or lessor has “outsourced” the repair and maintenance responsibilities to a third party contractor. In this regard, the tenant may typically be required to log a request directly with the third party contractor, and the contractor will respond to that request, issue the requisite entry notice on behalf the lessor to facilitate access to the property, and carry out the necessary repairs, without the property manager being directly involved at all.

There are obvious costs efficiencies in such an arrangement. The risk is that the property manager does not know all that is happening with the rental property that is under its management.

In this regard, property managers have expressed concerns that the third party contractor is assuming responsibilities which, hitherto, had been performed by a property manager, because, previously, the property manager would receive the request from the tenant for repair or maintenance, consult with the lessor and then organise a tradesperson to undertake that task.

There is no reason, in principle, why entry into a repair and maintenance arrangement with a third party contractor is any different from a property manager, properly authorised by the lessor, entering into arrangements with tradespersons to attend to repairs and maintenance.

The problems as to who is responsible for what work may be overcome if the parties set out in the tenancy agreement and in the Form 6 who has assumed responsibility for what tasks.

The tenancy agreement should state, in item 18, which identifies the lessor’s “nominated repairers”, the identity of the third party contractor to be retained for the purpose of the performance of the repairs and maintenance and, in particular, at clause 18.2, whether the “nominated repairer” or “third party contractor” is to be the first point of contact for “emergency repairs”.

It is suggested that, notwithstanding that the lessor and the property manager have retained a “third party contractor” for the purpose of repairing and maintaining the property, the property manager should not be removed from communications with the tenant as to the condition of the property. The name of the “nominated repairers” for electrical, plumbing and other repairs might be stated to be the “third party contractor”, but the contact number should be the property manager, so that the property manager can arrange the work.

Similarly, as to the “nominated repairer” for “emergency repairs”, it is important that the property manager is apprised of what “emergency repairs” are required and, once again, the contact number for the property manager should be included in this part of the tenancy agreement.

The property manager should also ensure, if a “third party contractor” is to be retained for the purpose of repairs and maintenance, that the “third party contractor”, and the tradespersons it engages, are appropriately qualified, licensed and insured.

Property managers will place themselves at risk if “third party contractors” are engaged for repairs and maintenance who may not be qualified, licensed and insured.

The property manager should also regularise this issue in the Form 6 form of appointment, by identifying, in Part 8, Section 2, the maximum value of the repairs and maintenance which may be paid by the property manager or the “third party contractor” without approval by the lessor, and ensuring that the “third party contractor” engaged for the repairs and maintenance is apprised of the budgetary limit in the performance of repair and maintenance work.

Otherwise, property managers will place themselves in the position of being at risk of “third party contractors” – who may be based overseas – commissioning work that has not been budgeted for, or approved, by the lessor.

It is also recommended that, notwithstanding the engagement of a “third party contractor” to undertake repair and maintenance work, the property manager should still remain responsible for the issuance of the notices to enter; it is only in this way that the property manager will ensure that they are fully apprised as to what is going on at the property with respect to the performance of repair and maintenance work.

It is essential, notwithstanding the involvement of the “third party contractor”, that the property manager remains the central repository of information as to the rental property.