December 2, 2020

Understanding the value of compliance and the impact of non-compliance for real estate agencies

In a state where data indicates renting is fast becoming the way of the future, now is the time to secure your position as a real estate agent who offers prime rental properties for long term renters. 


To do this, it is essential that you and your agency offer a premium customer experience. This includes being completely across the Residential Tenancies Amendment Act, which will come into effect in early 2021. 

Ensuring your property owner clients are compliant with this legislation will increase the value of the services you offer your clients. It will also protect your agency from the potentially harsh repercussions of non-compliance. 


How compliance adds value to real estate agencies


A first class agency continually looks to improve the quality of its clients’ investments. Providing better quality rental housing is a win/win as it helps you and your clients’ attract long term, better quality renters who treat the property as they would their own home.

When you are able to confidently explain and assure compliance, you are increasing the value of the property. As a result, the value of your overall rent roll will rise as well. 



What is the impact of non-compliant properties?


While being compliant is helpful to add value for yourself and the clients you represent, it is also important so you can avoid setbacks, unnecessary expenses and legal problems. 


Take a look at some of the issues you will encounter if the properties you manage aren’t compliant: 


Fines


The Residential Tenancies Amendment Act refers to ‘residential rental providers’. This includes property owners and the people who managed rented properties. 


If you’re responsible for the management of a property and you fail to take care of the minimum standard items in the Act, fines may apply. For individuals, this can be close to $10,000. A body corporate could face a fine of closer to $50,000. 


NOTE: This fine is for non-compliance with the Minimum standards. Fines also apply to other breaches.


Public blacklisting


While there has been a tenant blacklist for several years, 2021 will see the introduction of a similar list for unreliable property owners and managers. 

If you breach the Act, fail to remedy a breach or fail to compensate a renter as a result of breaching the act, the details shared on the Rental Non-compliance Register will include:


(a) the name of the residential rental provider

(b) the address of the rented premises in respect of which the order was made or the offence was committed; and

(c) if the residential rental provider has an agent, the business name and business address of the agent


As you can see, both you and the owner of the property will be named on the ‘blacklist’. 


Void insurance


If there is an injury or break in at a property which is not compliant with the Residential Tenancies Act, the resulting costs may not be covered by insurance. 

While it is the property owner’s responsibility to have insurance in the first place, they may look to their agent if they are faced with making a payout from their own funds. If you can’t prove you took every possible step to ensure compliance you may face legal action. 



Loss of income + compensation to the renter


Under reform 40, if a property does not comply with the prescribed rental minimum standards, the renter can terminate a residential rental agreement before they move in, or they can move in and request compliance as an urgent repair.

If the residential rental provider fails to bring property up to standard following the urgent repair request, the Victorian Civil and Administrative Tribunal can order the rental payment to be redirected into the Rent Special Account. The money can then be repaid to the renter as compensation. 

This means no commission for your agency and no rental income for the property owner. 


Business reputation damage


Property management is an exciting industry with excellent potential for growth as the population of renters in Victoria expands. 

However, if the properties you manage do not comply with regulations and your clients are impacted, you will struggle to build a rewarding and profitable business. 

It makes sense to stand out from the competition because you have gone the extra mile to ensure compliance and set the standard, rather than chasing after it. 


How to avoid the impact of non-compliance


After the COVID outbreak and the resulting fallout, property managers have found themselves managing larger than usual workloads.

Instead of attempting to familiarise yourself with each change required by law, taking on the challenge of educating every property owner and ensuring each home you manage is compliant, it makes sense to reach out to a professional. 

A specialist property compliance service offers a unique audit model. This will help you to provide every property with support to reach the minimum standards as dictated by the new reforms. They will also provide you with education material to help you communicate with your clients. 

As a result, you’ll have less stress, more time and better peace of mind, knowing you and your clients are protected from the negative impact of failing to comply with regulations.


A compliance audit expert will help protect your rental property assets against the financial costs and other impacts of non compliance. Get in touch to find out more. 


Disclaimer: This article is for marketing purposes only and was correct at the time of publication. We endeavour to ensure all information is as current as possible. We strongly recommend you do your own research in regard to any details of the new legislation.