Our role as property managers is to do our very best to deliver to our landlords reliable rent and minimal vacancy.
The first priority is to attract, select and keep a good tenant, one that pays fair rent reliably, maintains the property well and ideally stays for a long time. I’ve described best practice for the first two parts (attract & select) of this process earlier. Let’s now look at the keeping part.
Firstly, we need to focus on having a happy tenant. This is primarily common sense and it should be fairly easy for owners and property managers to appreciate the critical elements.
- Being civil and respectful. Tenants are not second-class citizens. In fact, the vast majority are very good people, respectful of the property and grateful for the opportunity to call it home. A large number hold important positions and many are quite wealthy as well. Well over 25% of them own residential property. One of my greatest pleasures is knowing that we have landlords who also our tenants plus tenants who have chosen us to manage their investment property.
- Feel-good routine inspections. Part of our role is regularly visiting the property. Our first visit is after three months and six-monthly thereafter. The main reason for this is to check the condition of the property, primarily maintenance that hasn’t been reported – mould, cracking, small leaks and so on. These issues are vastly more common than discovering a rogue tenant. The tenant should not feel that the main purpose of the visit is to check on them. Why should the lovely 98% be treated as though they are likely to be one of the 2%? They are not unruly or untrustworthy children.
- Repairs and maintenance attended to swiftly and effectively. Responsive owners, pro-active property managers and superior tradespeople are the ingredients to this element. Sure, there can be frivolous maintenance requests at times, but the tenants request should be welcomed as early attention to issues can prevent future disasters.
Secondly, we should facilitate longevity of the tenancy. It’s in the owners’ interests to keep a tenant as long as possible. Each reletting event delivers a vacant period, letting fees and costs as well as possible damage by removalists in the move out-move in.
Setting a longer lease in the beginning and then renewing it before the end of each lease gives both the owner and the tenant the highest security of tenure. The 3-month and 9-month routine inspection is also part of this best-practice process. One of these visits will always occur about three months before the expiry of the lease. The agent has a conversation with the tenant about their intentions and this is conveyed to the owner, together with a rental review. The owner can then give their approval or not for a new lease and a rental adjustment. This decision is reflected in a new lease being signed before the expiry of the existing lease and, if there is a rental increase, with the required 60-days-notice.
At some point in any tenancy, a tenant will leave and, in advance of that event, will be reluctant to renew a lease. This is understandable. The owner then has three choices – terminate the lease, offer a shorter lease or accept the uncertainty.
This can be tricky in a market such as we have today. Rental values have fallen about 5% over the past six months. We measure our median vacancy period at Marriott Lane and it has increased from 4 days to 11 days, showing it’s now significantly more difficult to find tenants, especially if the rent is not reduced to market.
If a tenant wishes to stay on without a new lease, it’s called a Continuing Period and all terms and conditions (and rent amount) remain the same, excepting the terminating provisions. Today, going to the market would inevitably result in a lower rental for the next lease. This brings forward this ‘loss’ and brings forward a vacancy period as well. The alternative to demanding a new lease is letting sleeping dogs lie – the rent remains where it is and the tenancy may continue for a short or long time. It’s quite possible that their reason for contemplating a move may be delayed or disappear.
Keep in mind that it’s expensive for tenants to move, so in the normal scheme of things, they will choose to stay, even if the rent is slightly above market. It’s also in the landlords’ best interest for the tenants to give notice rather than the reverse. In the latter, the tenant can actually leave straight away and may possibly be less cooperative about rental inspections before their departure. Occasionally, it may be pragmatic to reduce the rent if the tenant threatens to leave for better value elsewhere. The power has shifted somewhat lately and your agent should help you weigh up your options.
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