How Labour could change property: law on apartments, managers could be reformed

The new Labour Government could make big changes to the $50 billion apartment sector and raise property management standards for all landlords and tenants, experts say.

Joanna Pidgeon, a partner at Pidgeon Law, and Real Estate Institute chief executive Bindi Norwell hope for reform of laws governing apartments and property managers.

"I am encouraged that Labour confirmed immediately before the election that they will look to reforming the Unit Titles Act 2010," Pidgeon said today, citing a member's bill drawn from the ballot just before the election, although there wasn't enough time for its first reading.

"This will probably see body corporate managers regulated and required to be part of at least a membership body such as Strata Community Association or REINZ, as well as providing better disclosure and governance for bodies corporate," Pidgeon said.

Former Auckland Central MP and National deputy leader Nikki Kaye campaigned on this for many years, joined lately by National leader Judith Collins.

Norwell said the institute "will be holding Labour to its pre-election promise that it will review the regulation of property managers and bring in at bare minimum a code of conduct, minimum training requirements and some recourse for complaints."

The institute had fought for a decade to try to raise property management standards, including a campaign last year backed by more than 80 organisations, she said.

REINZ already has a code of practice, ongoing education and professional development training that could be enshrined into new law easily, Norwell said.

"The industry will also be looking for greater clarification around the pre-election announcements in regard to the Resource Management Act. It is essential that we can build more houses at scale in order to fill some of the backlog of shortage and that housing can become more affordable," Norwell said.

More than 1 million people rent residential properties, so raising the bar could benefit landlords as well as tenants.

Pidgeon said some property managers affiliated with REINZ were complying with that body's regulations, "but there is no requirement for this, or for a property manager to have any training. They often hold large sums of other people's money. Regulation should provide some protection against some of the cowboy property managers," Pidgeon said.

She cited body corporate and property managers who often hold thousands and sometimes millions of dollars, saying some regulatory oversight would give greater protection to landlords, tenants and apartment owners.

The case of Gurpreet Grewal, formerly of Harcourts, was the largest property management case of its kind which she knew of in New Zealand, she said.

Gurpreet Grewal, formerly of Harcourts, which won a case against him. Photo /file

Two years ago, Harcourts won a court victory over its youngest former franchisee, Grewal, who was ordered to repay $1 million in loans.

In a case heard in the High Court at Auckland, Associate Justice Roger Bell ruled Harcourts - New Zealand's largest real estate network - was entitled to summary judgment for $1,012,300.05 in loans it made to Grewal, also known as Preet.

Bell dismissed Harcourt's applications against Grewal and his wife for more than $250,000 in franchise fees, saying evidence was not sufficient and Harcourts' case on that front was inadequate.

Preet & Co Real Estate once had franchised Harcourts offices in Howick, Ellerslie, Botany, Manurewa, Otahuhu, Pakuranga, Manukau and Papatoetoe, the decision said, as well as Preet & Co Rentals, but funds were missing from the trust account of Preet & Co Real Estate.

"The evidence is silent as to how the funds went missing. There is nothing to suggest Mr and Mrs Grewal took the funds," the judge said two years ago.

Pidgeon sees no prospect of reform in another area she has campaigned on for many years.

"Unfortunately there is no mention of looking at reform of cross leases," she said of those titles which she has previously called the ticking time bomb of the residential property sector.

She is increasingly being contacted by people who want to convert from cross lease to freehold, saying they had problems with alterations not having been dealt with correctly.

Because these people have to deal with disputes by arbitration, the Government never became aware of ongoing costs and issues not being dealt with, she said.

Even enabling cross lease owners to access the Tenancy Tribunal for disputes would improve access to justice on this issue, she said.

Nor does Pidgeon forecast any rental housing standards to be further escalated.

Residential housing tenancy minimum standards have now been set by the previous Government and it was unlikely there would be a change in tenancy law which currently requires landlords to give three notices within a 90-day period about a tenant's anti-social behaviour to be able to terminate a tenancy.

Landlords would become more discerning about who they rented to, which would put more pressure on social housing, Pidgeon said.

"In the Auckland inner-city, apartment rents are dropping as the lack of international students sees an oversupply of rentals, but that is not the same situation in the suburbs," she noted.