week 2 residential pm

Question 1

key stakeholders of residential pm

Answer 1

1. Owner/investor
2. Property manager
3. Tennant

Question 2

explain owner and investors

Answer 2

Owners / Investors:
Invest in property for:
o	Long-term capital growth
o	Apply equity to further investments 
o	A reliable income source
o	Reduce tax liabilities where possible 

Owner’s goals may be:
o	Cash flow
o	Tax benefits –negative gearing
o	Leverage
o	Diversification 
o	Appreciation
o	Pride of ownership

Question 3

what may investors look for?

Answer 3

o	Location
o	Condition (condition report)
o	Building style/design
o	Allotment size
o	Maintenance
o	Appliances
o	Development potential
o	Yield
o	Stable tenants and low turnover rates, low vacancy rates

Question 4

what property professionals must do

Answer 4

Fiduciary Duties – Imposed by law
•	Care
•	Loyalty
•	Obedience
•	Accounting
•	Disclosure

o know and adhere to all relevant legislation and laws
o act fairly and honestly, to the best of their knowledge & ability
o and act reasonably to minimise disputes
o follow their client’s lawful instructions
o act in their client’s best interests, except if it would be unlawful, unreasonable or improper (unprofessional) to do so
o disclose any personal or commercial relationship they have with a supplier to clients
o exercise skill, care and diligence in performing their duties
o promptly notify a landlord of any breach of a tenancy agreement

Question 5

what property professionals must not do

Answer 5

o use or disclose confidential information obtained while acting for a client, unless they are authorised to by the client or required to do so by law
o create a potential conflict of interest with one of their clients by acting for another person eg. For tenant and landlord
o accept a commission/payment from both a client and someone else for the same service
o influence some one to breach a contract
o engage in conduct that is unprofessional or detrimental to the estate agency industry
o Eg. Recommend a supplier to a client without disclosing any personal or commercial interest you may have with that supplier; Take commissions on R&M work

Question 6

explain management agreement (contract)

Answer 6

o	Identification of property
o	Names of parties to agreement
o	Information identifying the parties
o	Authority to act on behalf of client
o	Period of duration of the agreement
o	Termination of the agreement
o	Reimbursement of Agent
o	Remuneration
o	Extent of Agent’s authority
o	Accounting in respect of money received

Tennant only deals with property manager = hands length transaction

Question 7

explain property management - the process

Answer 7

SEE slides - david call me!

Question 8

key objective for pm

Answer 8

o Managing income / Managing expenses
o Asset protection
o Client relations / Tenant relations – CAV, Tenants Unions
o Establishing a Rental Schedule – determine market value
o Gauging profitability…
o Comparative analysis – size, location, amenities, BRs
o Demographic data of the area
o Show List – and aid to determine rental schedule

Question 9

what influences rental income

Answer 9

Supply and demand
o Technical oversupply – more u/s available than potential tenants
o Economic oversupply – D&S – impact on Price – potential tenants cannot afford to pay the price of available space
Marketing Availability of space
Neighbourhood
o Location, street or curb appeal,
Property type
o Detached, semi-detached, high rise
Property condition
o internal, external, architecture
o Effective Advertising and promotional strategies

Question 10

define a lease

Answer 10

A written contract between a landlord and a tenant that transfers the right to exclusive
possession and use of the landlord’s property to the tenant for a specified time

A lease is a legal contract between a landlord and a tenant that defines:
The amount of rent
How the rent is to be paid
The length and type of tenancy
The amount of bond required
Other conditions and rules
Any special terms agreed by the parties

Question 11

define security deposit / bond

Answer 11

A payment by a tenant, held by the landlord (or their agent) during the lease term and kept on default or damage of the premises by the tenant

Question 12

define rent

Answer 12

Monies paid by the tenant in exchange for occupancy

Question 13

define condition report

Answer 13

Prepared prior to the tenants occupancy noting the general condition of the property

Question 14

define gross lesae

Answer 14

A common residential lease under which the tenant pays a fixed rent
and the landlord
pays all operating expenses for the property

Question 15

define net lease

Answer 15

The tenant pays some or all of the expenses of the property in addition to the rent. Eg utilities, taxes levied against the property

Question 16

define % or overage lease

Answer 16

Called an “overage” lease – used in malls, fixed base rental with a % of tenant’s gross income

Question 17

define landlord covenant

Answer 17

A contractual promise made by the landlord

Question 18

3 common types of leases

Answer 18

Three common types of leases:
Fixed term – signed for a set period of time – 12 months
Periodic lease – period determined by the term of the rent payments (eg: month by month) it is rolled over to when a fixed term lease ends
Tenancy at will – no fixed
time period

Question 19

3 essential elements of a lease

Answer 19

The grantor (landlord) must intend to give the grantee (tenant) the right to exclusive possession

The lease must be for a certain period of time (known as the term)

The lease must be capable of being rendered (grantor must be capable of
giving exclusive possession)

and contracts intending to bind parties must be in writing – Section 52(1

Question 20

explain a bond

Answer 20

o A bond is paid by a tenant and acts as security for the landlord against the tenant meeting the terms of the lease
o In Victoria all rental bonds must be lodged with the RBTA (Residential Tenancies Bond Authority)
o The bond amount is usually the equivalent of one month’s rent
o When a bond is paid a landlord/agent must prepare a condition report

Question 21

requirement for new tennancies

Answer 21

o Victoria’s Residential Tenancies Act (RTA) states that at the start of every
o tenancy the agent/landlord must provide the tenant with:
o A copy of the CAV guide “Renting a home: a guide for tenants”
o A copy of the lease agreement
o Two copies of the condition report
o A bond lodgement form
o The landlord’s or agent’s full name and contact information

Question 22

who must comply with rta

Answer 22

1. Landlord
2. Tenant
3. Property manager (agent)

Question 23

resolving disputes

Answer 23

o	Available options include:
o	Mutual agreement
o	Conciliation
o	Tenant advocacy services
o	VCAT

Question 24

What details should a property manager note down when inspecting a property?

Answer 24

o Location – proximity to shops, schools, transport
o Market conditions for rentals in the area (e.g. median prices)
o Characteristics of the property – special features, pool, alfresco, size property
o Demography of area – familes etc.

Question 25

Why is it important for a manager to undertake a pre-condition inspection and complete a “condition report”

Answer 25

o Condition report is a requirement and must be undertaken by the landlord prior to tenants arrival date
o Tenant must be given 2 copies and sign it within 3 days of settlement – Used in disputes regarding the ‘condition’ of the property
o Report should check all utilities are working (up to required standards)
o Typically recorded with photo evidence.

Question 26

Describe the legal obligation of a landlord / property manager when they receive a bond from a tenant at the commencement of a residential lease

Answer 26

A bond is a payment made by the tenant, which is usually to the value of 1 months rent. It is held by the agent as a security for the entirety of the lease term. Tennant receive the bond in full at the termination of the lease assuming there is no damage

In Victoria bond money must be transferred and held at the “Residential Tenancies Bond Authority”

Question 27

What practices can a property manager adopt to avoid misunderstanding with:

1. ) tenants
2. ) landlords/clients

Answer 27

o	Maintaining constant and clear communication in a professional manner
o	be transparent
o	Timely
o	Receptive
o	up to date with legislation

Question 28

As a residential property manager what factors would you consider when processing a tenancy application?

Answer 28

o Ability to meet financial deadline of lease – credit history, income, past history or renting and paying no time
o Track record of references will want to be thoroughly examined in order to indentify if the person has the respect or decency to treat the property fairly
o If have met the prospective tenants – how they came across in conversation, whether they have animals, children etc
o Be careful to no discriminate – you cannot legally refuse to rent to a tenant with children

Question 29

What strategies can managers implement to get tenants to look after the property?

Answer 29

o Standard incentives will typically include return of the bond once the lease is completed in full & an extension of the lease once the original is finished
o The PM is collaboration with the landlord could offer a number of incentives which encourage the tenants to look after the property
o They could be financially related such as a discount on mothly rent if the property is kept to a certain standard, free cleaning, landscaping, discount on utilities

Question 30

Explain the difference between a lease and a licence

Answer 30

Lease:
o Is a transfer of right to enjoyment (exclusive possession) of that property by the lessor the lessee made for a certain terms in consideration of a fee subject to the terms set out in the lease agreement
o A lease grant exclusive possession for a fixed period of time and may be transferable

Licence:
A licence is the granting of a permission to use the land in consideration of a fee subject to the conditions set out in the licence
o Liquor licence which will be granted by council even if it is for a retail building privately held
o A licence does not create exclusive possession or transfer an interest in the land

Question 31

What is the term “tenant covenant” and what is a “landlord covenant” ?

Answer 31

Both tenant and landlord covenants are promises made by the respective parties contractual, which would likely exist in a rental lease, would be the contractual and timely payment of rent to the landlord

A landlord covenant would be a contractual promise to allow the tenant to enjoy the property without any disturbance

Question 32

Under the RTA what must the landlord or their property manager provide a tenant with at the start of a residential tenancy?

Answer 32

o Copy of the CAV guide “renting a home: guide for tenants”
o Copy of the lease agreement
o 2 copies of the condition report
o A bond lodgement form
o The landlords or agent’s full name and contact information

Question 33

Explain with reference to the residential tenancies act the options available to a landlord when a tenant is late paying their rent

Answer 33

Non payment = non payment of rent by the tenant more 14 days, mean the tenant is in arrears

o Only after q4 day in arrers can one give 14 days notice. Must be in writing, email or handed in person or sent by registered email.

o If tenant wont move out then need to go to VCAT and request a notice of possession

o Once have this notice from VCAT then can ask police to remove tenant
Can take up to 6 week collectively.

Question 34

What are the reasons a landlord or their property manager could terminate a residential lease?

Answer 34

Many reasons of which include unavoidable and avoidable issues for the tenant:

Unavoidable – Landlord is selling the property (need to be vacant) 60 days notice
o End of fixed term tenancy (90 days) or possibly of an unspecified reason by the land lord (this requires notice of 120 days)

Avoidable = From the tenants perspective include, non-payment of rent, failure to pay the bond, failure to comply with a tribunal order, successive breaches, use of premises in an illegal manner – all 14 days

Question 35

Any reason Property manager could terminate residential lease immediately?

Answer 35

Only if damaging property or dangerous to surrounding people, but it generally no as appropriate channels must be used – e.g. appropriate notification of 14 days even when doing illegal activities in property)

Occasionally issues such as “acts of god” (flooding) may render the dwelling unliveable and as such the tenant may have to move out immediately given the dangerous condition and repairs needed.

Question 36

What requirement does the RTA stipulate for the inspection of premises during the term of residential tenancy?

Answer 36

Landlord can only enter the property once per 6 months and not in the first 3 months of the lease
o Written warning must be given between 7 days and 24 hours before the intended vist.
o Visit must be between 8am-6pm
o Pm must enter from an appropriate method (front door)

Landlord willRequirements for be able to legally enter the property more regularly if they are showing a prospective buyer or tenant the property – should only be undertaken within 14 days of tenant departing and authortirization wlil be required from the tenant

Question 37

What are the managers obligations:
At the start of the tenancy
During tenancy
and at the end

Answer 37

At the start of the tenancy? payment, bond lodgement, utilities (who pays?), property condition report etc.

During tenancy – Rental increases, landlord rights for inspections, maintenance and repairs

At the end of their tenancy? Notice time require, when to stop paying rent, condition of property vs condition report, how the property is left, reclaim bond