You and your property manager

Property managers who offer their services for a fee must be registered real estate sales representatives working for a licensed real estate agent who is in charge of the agency. The licensing of real estate agents and registration of sales representatives is administered by the Consumer Protection Division of the Department of Commerce.

A property manager must satisfy Consumer Protection that they have completed recognised course work, and are of good character and repute in order to obtain a certificate of registration.

Property managers, like other sales representatives and real estate agents, are governed by the Real Estate and Business Agents Act 1978 (REBA Act) and the Code of Conduct for Agents and Sales Representatives.

Property managers must also be familiar with the rights of lessors and tenants as set out in the Residential Tenancies Act 1987 (RTA).

You can check if a property manager is registered by calling Consumer Protection’s licensing branch on 1300 304 064 or the online licence search.

A strata manager performs a different role to that of a property manager. A strata manager is a person who collects periodic levies, arranges repairs, common property insurance and other matters on behalf of people who own strata properties in the same strata complex.

Strata managers are not required to be licensed in their own right. If a strata manager is also licensed as a real estate agent through the same business, then the clients of that strata manager have a greater degree of protection because of the education, conduct and trust account requirements placed on real estate agents. However, strata issues do not fall within the REBA Act.

Issues relating to strata titles (but not strata managers) are dealt with by Landgate. Landgate can be contacted on 08 9273 7373.

The main roles of a property manager are to market your rental property, select a tenant and manage your property.

Depending on your needs, you can appoint a real estate agency to do one or more of these tasks. The services an agency provides will depend on the written management agreement you have agreed upon with the agency. It is usually known as a written authority, an authority to act or an appointment to act. For more information on written authorities see the Consumer Protection publication Real estate fees – negotiating with an agent.

Some of the specific tasks a property manager may carry out include:

• negotiating a rent appropriate for the property, the area and the current market conditions;
• advertising for and locating potential tenants;
• selecting a tenant and collecting the rent;
• preparing a periodic or fixed-term residential tenancy agreement;
• lodging, varying and applying for the release of security bonds;
• carrying out inspections of your property as agreed;
• reporting and arranging for necessary repairs and maintenance to the extent authorised;
• providing relevant notices and financial statements to you;
• attending meetings, such as strata company meetings;
• paying local council rates and strata levies etc; and
• issuing breach/termination notices to the tenant, or arranging for court proceedings when appropriate.

The Code of Conduct for Agents and Sales Representatives sets out standards of practice for all agents and their sales representatives, including property managers in Western Australia. These requirements protect you by promoting and enforcing appropriate standards of conduct in the marketplace.

A number of these standards refer to the written authority, which is a legally binding contract between you and the licensed real estate agency. The written authority authorises a registered property manager to manage your property for you.

The responsibilities of agents and property managers under the Code of Conduct include requirements to:

• act in your best interests, except where it would be unreasonable or improper to do so;
• follow your instructions, except where it would be unreasonable or improper to do so;
• act fairly and honestly;
• exercise due skill, care and diligence;
• disclose in writing if any recommended supplier of goods or services eg cleaners, carpenters has a ‘significant relationship, connection or affinity’ with the agency;
• promptly provide information about expenses paid on your behalf, such as copies of invoices;
• not knowingly mislead or deceive any parties in negotiations or a transaction;
• not engage in harsh or unconscionable conduct;
• not use or disclose any confidential information obtained while acting for you unless permitted to do so by law;
• not advertise or offer for lease a property for an amount, or terms, different from those authorised by you;
• not seek payment to others on your behalf for fees that exceed the amount agreed in the written authority, or is not initialled in the written authority; and
• not seek payment of a fee that is unjust in light of the written authority and other circumstances.

The Code of Conduct requires property managers and their unregistered assistants to be supervised at all times by the licensed real estate agent in charge of the agency. If you are having problems with the property manager, one of your first steps should be to speak to the supervising agent.

Fees charged can vary substantially from agency to agency and are fully negotiable, so it is wise to shop around for the best deal. Remember the ‘best deal’ is not always the cheapest. Your choice of agency should be based on whether the appointed property manager will successfully reduce your workload and stress, in addition to protecting your investment.

When choosing an agency to manage your property, it is a good idea to seek recommendations from friends and family.

Although you may negotiate fees and charges with an agent, ask to meet the specific property manager who will be dealing with your tenants and looking after your property. If you speak to several property managers at their place of business, you can assess their manner and professionalism while also gaining some understanding of their business standards and experience.

Useful questions to ask during these visits are:

• What evidence and/or assurances can you provide to me regarding the quality of property management service your clients receive?
• Can you provide me with a copy of the statement you send property owners and if necessary explain it to me?
• What type of tenancy will suit my particular needs?
• Could you show me your standard written authority and explain to me the different fees and the total fee you propose to charge me?
• How will your agency advertise for tenants?
• What do you charge for advertising, and where will my property be advertised?
• What sort of checks do you do to assess the suitability of prospective tenants?
• How much do you think the property should be leased for? Why?
• How much will the security bond be? (In most circumstances it should be four weeks rent).
• What will happen to the security bond at the end of the tenancy?
• Could you show me a copy of the prescribed tenancy agreement?
• What type of property inspection reports will be provided to me? How often will they be provided and what will this cost? (A maximum of four routine inspections are allowed per year).
• What arrangement do you suggest for the apportionment of water costs?
• Do you charge for postage and petties for things like posting mail to the owner, telephone calls to the owner and photocopying of documents? If so, how much are they and how are they calculated?
• How thoroughly will you check my property after the tenant leaves? Could you show me a copy of a property condition report, and can photos/videos be included? How much will this cost?
• If the tenant fails to pay rent, will the notice of breach for late rent be issued automatically and promptly?
• Do you have any experience representing property owners in the Magistrates Court?
• What fees will I be charged if I terminate the Written Authority before the agreed period expires? (Note, these fees, often referred to as ‘liquidated damages’, can be negotiated before entering into the agreement. Under provisions in the Australian Consumer Law, standard form consumer contracts with ‘unfair terms’ can be disputed in court and declared void).
• What happens if my circumstances change and I want to live in my property?

It is a good idea to discuss with your property manager the different types and amounts of insurance you may need.

In addition to building insurance, you should discuss the option of landlord protection insurance with your property manager. This type of insurance can protect you if the tenant maliciously or deliberately damages your property or if you experience a loss of rental income whilst repairs are being undertaken.

It is wise to find out exactly what the insurance policy covers you for. For example, some landlord protection policies will cover you for damage deliberately caused by tenants but not accidental damage.

Another fact to consider is that some landlord protection underwriters will only deal with real estate agencies, not directly with owners.

You may also wish to ensure that you have adequate public liability insurance in case someone comes to harm on your property.

As with any business transaction, it is important that you are clear in your own mind as to what exactly you require concerning the management of your rental property.

Some questions you should ask yourself about the management of your property include:

• How promptly do you wish to be told if your tenant is behind with the rent?
• Do you want to be consulted before any repairs or maintenance are carried out, no matter how small? Or would you prefer to be contacted only when the amount exceeds a set limit?
• How often do you want property inspections carried out on your property? The maximum allowed under the RTA is four per year.
• How long do you wish to engage the real estate agency? This is known as the period of agency.
• Do you want to be involved each time a tenant is selected?

Any provisions, like those detailed above, need to be agreed in writing, preferably in the written authority.

The written authority you sign to authorise a real estate agency to manage your property is a legally binding contract. This means that both you and the real estate agency are obliged to fulfil the requirements of the written authority.

The written authority can vary between agencies, so it is important you read the contract carefully.

You may wish to check the written authority includes specific detail such as:

• the period of agency;
• the payments the agent is required to make on your behalf using the rental monies collected;
• how you would like to receive your rental proceeds;
• whether or not you agree to pay separate marketing and advertising costs, with a maximum amount payable each time the property is vacated;
• an agreed letting fee and management fee;
• if you would like your property manager to organise improvements to your property (such as painting or the installation of air-conditioning) and the fee for this service (whether as a fixed amount or a percentage of the total cost of the project);
• the nature of expenses an agent may claim related to their duties, such as photocopying and faxing costs or reimbursement for repairs paid on your behalf. The method by which they will be calculated and the maximum amount payable must be clearly set out;
• whether you want to be sent copies of all inspection reports and breach notices for damage (this may help you to keep track of the condition of the property if you are concerned about the property deteriorating).

You should discuss these matters with the agent before signing the written authority.

To avoid misunderstandings or problems later on, it is important to include all agreements between you and your agent in the written authority. You and the agent should sign and date any special requirements that are added to the standard contract.

You may also wish to include a requirement that you are present at all or certain property inspections carried out by the agency.

A management fee and inspection fee are likely to be included in the written authority with the agent. As with any other service, these fees may be negotiated with the real estate agency so you may wish to shop around for better deals.

A management fee covers the routine or day-to-day business of managing your property. The written authority used by the Real Estate Institute of WA (REIWA) members allows for a management fee which is either a percentage of the gross collections for the tenancy period or a fixed fee per month/year. The term ‘gross collections’ refers to the total value of all money collected from all sources, including rent, water charges, electricity and gas charges. GST is payable on the management fee and other fees charged by the agent.

The written authority will mention other fees and costs, such as charges for preparing the property condition and final inspection reports, property inspections, postage, banking transaction fees, attendance at meetings including court appearances, marketing and advertising.

Tenant paid letting fees were abolished under changes to the RTA and the REBA Act. Real estate agents cannot charge a letting fee to the tenant, though they can still charge these fees to property owners if agreed upon in the written authority.

Additionally, the Written Authority used by REIWA members allows an agency to charge the owner, if agreed, a leasing fee for each new tenancy that is either a percentage of the gross collections for the tenancy period or a fixed fee per month/year.

In most cases, property owners will want their property manager to arrange repairs, newspaper/internet advertising or other maintenance work on their behalf.

Property managers cannot pay expenses on your behalf unless you give them permission to do so in the written authority.

Before you sign the written authority, you should think carefully about whether you want the property manager to arrange these matters for you. If you do, it is wise to confirm the details in writing in the written authority and then sign and date these with your agent.

For example, you could require that all payments above a certain amount are discussed with you before they are made. This type of condition can prevent misunderstandings and unexpected bills later on.

If a property manager incurs a cost on your behalf, they are required to include documentation or other evidence when they claim the expense. In addition, under the Code of Conduct you are entitled to ask for any further information you may ‘reasonably require’ to be satisfied the amount of the expense is correct and that it was paid appropriately.

In relation to advertising, some additional requirements are also in place. A property manager may not seek payment of an expense for advertising, signboards, printed material and promotions from you unless:

• you have agreed in writing to pay the expense;
• the written authority specifies a maximum amount for advertising; and
• the maximum amount stated on the written authority has been initialled by you.

Once you have chosen an agent, you should walk through the property together to reach an agreement about the actual state of your rental property. You may choose to photograph or video the property as proof of its condition at that time. The agent will prepare a property condition report describing the condition of the property. The property condition report will be used as the basis for comparison if the tenant leaves the property in a poor condition not attributable to normal wear and tear. Note the minimum content of the property condition report is prescribed in the Residential Tenancies Regulations.

If you have any particular areas of concern, it is recommended you include them in the written authority and the residential tenancy agreement with the tenant. For instance, you may want to specify:

• the agent inspect your driveway for oil stains during property inspections and for the tenant to remove any oil stains they have made before vacating the property;
• whether pets or smoking are allowed; and
• who bears responsibility for water consumption and the maintenance of gardens, lawns and pools.

If you intend to leave any furniture or other items on the property, you may wish to make an inventory of the furniture by detailing each item and its condition. Photographs can be helpful as they provide visual evidence of the initial condition of the furniture for future reference.

Once agreement has been reached between you and the property manager about the items and their condition, the inventory can be attached to the prescribed residential tenancy agreement. An agency will generally charge more for looking after a furnished property because of the extra work involved. They may also charge for an inventory to be conducted at the completion of each tenancy.

You should note that furniture is considered an investment and as such, will depreciate over time. For example, a $2,000 television may be depreciated over five years, so if it is broken after four, it may only be valued at $400.

During the tenant selection process, you should bear in mind the Equal Opportunity Act 1984 does not permit discrimination on the basis of a person’s age, family responsibility, gender, sexual orientation, gender history, disability, marital status, pregnancy, beliefs, race or spent convictions.

The RTA does not allow a lessor or any other person to refuse to let a property to someone who will have children living with them.

If you give any subsequent instructions to your agent after signing the written authority, make sure your instructions are in writing and that you keep a copy. This will help you and your property manager keep track of your requirements.

If a new instruction arises that is in conflict with the written authority you signed then the written authority will need to be amended to reflect the new instruction. The agency may or may not agree to these changes. Any amendment should be signed and dated by you and the agency.

Even if you have a property manager acting for you, you have legal obligations to tenants that are set out in the RTA. Real estate agents and the property managers they employ must comply with the RTA, the written authority, and other relevant laws.

The RTA covers matters dealing with the rights and obligations of tenants and lessors. Some of the matters the RTA deals with relate to security bonds, property maintenance, repairs, locks and security. You may wish to discuss these matters further with your agent or property manager.

It is now a legal requirement to have professionally installed, hard-wired smoke alarms and safety switches (RCDs) in premises before any new tenancy agreement commences. All leased premises must have had RCDs installed since August 2011 (this includes properties with agreements that pre-exist this date). All leased premises must also have had hard-wired smoke alarms installed by no later than October 2011.

For more detailed information about your rights and obligations to your tenant, you can contact the Consumer Protection Advice Line on 1300 304 054. Consumer Protection provides advice and assistance to tenants and lessors on residential tenancy issues. Tenancy information is also available on Consumer Protection’s website www.commerce.wa.gov.au/tenancy

If you wish to end your agreement with the real estate agency, you should first check your written authority or consider obtaining legal advice.

If you stop paying property management fees, and have not cancelled your agreement as set out in your written authority, then an agency could decide to take you to court for being in breach of the contract.

It is important to cancel your agreement in writing and give the proper notice required by the written authority. In most written authorities, if there has been a fundamental breach by either party, you or the agent can cancel your agreement by giving 28 days notice in writing to the other party (check your written authority for the termination requirements that apply to you).

Most written authorities usually allow for ‘liquidated damages’ to be paid to the agent at the current rate of 50 per cent of the management fee that the agent would be expected to receive for the unexpired period of agency. If you do not agree with this clause you may negotiate another rate with the agent or strike out the clause before signing the written authority.

However, if the agency you are contracted with is sold to another agent or closes down, then any existing Written Authorities are automatically terminated. Another contract will need to be established with another agent (whether you choose the agent buying the agency or another agent) if you can agree to the terms.

Under the Australian Consumer Law introduced in January 2011, there are provisions specifically relating to unfair contract terms in standard form consumer contracts. A term is unfair if it causes a significant imbalance in the parties’ rights and obligations; is not reasonably necessary to protect the legitimate interest of the supplier; and would cause detriment if it were applied or relied on.

A standard form contract will typically be one that has been prepared by one party to the contract and is not subject to negotiation between the parties. Unfair contract terms in a standard form consumer contract may be disputed in court and declared void.