RentCover Report we ve got you covered

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June 2012

RentCover Report – we’ve got you covered

Welcome to the June edition of the RentCover report!

Doesn’t time fly? With the end of the financial year fast approaching, it’s a good time to check that insurance policies have been paid ready to claim with this year’s tax return – and don’t forget to claim depreciation on your investment property, new or old.

In this issue, we look at a number of problems which are increasing as times change. A new class of “professional tenants” are keeping property managers on their toes, while increasing numbers of drug “cooks” are establishing clandestine labs in rental properties.

You might be reassured to know RentCover has changed with the times, to keep covering landlords for the incidents and expenses of the era.

I hope you enjoy this issue of RentCover and look forward to bringing you more insights next month. Sharon Fox-Slater

General Manager, RentCover

News in brief…

Investors who want a piece of the USA property market without getting on a plane are being targeted with a $50-100 million capital raising, closing on 12 June, by Dixon Advisory’s US Masters Residential Property Fund ahead of a proposed 20 July float on the Australian Stock Exchange.

The sheriff’s sale of an encumbered $630,000 Braybrook house for $1,000 has been overturned by the Victorian Supreme Court, which found the sale was not legitimate because – even though the property was mortgaged – $1000 was too far removed from owner Zhiping Zhou’s $165,000 equity.

ANZ customers are “not happy, Jan” with the bank’s decision to time interest rate changes independent of the Reserve Bank. In Roy Morgan research, ANZ’s retail customer satisfaction rating fell 1.9% during April to 75.5%. Social media monitoring company www.sentimentrics.com.au found negative views soared from 12% prior before the announcement to 19%.

Western Australian property investors are up in arms about changes to tenancy law which will introduce 30 new fines for owners and no new fines for tenants. According to the Property Investors Association of WA, the changes will increase owners’ paperwork and costs, enhancing “the existing legal bias towards tenants”. In changes to start on 1 July, the Victorian Government has cut stamp duty for first home buyers by 20 per cent, but cancelled a bonus for those who build a new home. The stamp duty cut on homes under $600,000 will increase progressively to 50 per cent. First home buyers will still be eligible for a grant of $7,000.

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Scammers and super savvy “professional tenants”

Landlords and property managers in some of

Melbourne’s ritziest suburbs have been scammed by a conman who spent nearly five months in a series of luxury houses without paying rent – to the tune of more than $22,500.

The Real Estate Institute of Victoria (REIV) warned members convicted conman Joshua Peter McIntosh had the “airs, graces and trappings of a person of substance” and used a number of pseudonyms, according to a report in The Sunday Age.

“The gentleman in question… is very good at his chosen profession, having well and truly sucked in some experienced property managers and at least one landlord along the way,” the REIV warned.

His alleged methods included cancelling credit card or Bpay payments for the bond and first month’s rent after obtaining keys or to sweet-talk managers into allowing access to the property after claiming family tragedy or processing delays then failing to pay any rent.

Joshua denies wrongdoing but the Victorian Civil and Administrative Tribunal disagrees, with orders he pay more than $22,500 rent outstanding on luxury properties he “rented” in Brighton East, Hampton and St Kilda for periods ranging from 39 to 69 days.

EBM Insurance Brokers General Manager, RentCover, Sharon Fox-Slater said the case held a number of lessons for property managers: “Never judge a book by its cover, never hand over keys without confirming money has cleared, always request high quality ID from applicants and – if things do go wrong – go to court sooner rather than later.”

Queensland property management consultant, Jade Guilmartin, told RentCover about another “professional tenant”, who contacted the owner direct with an offer to “buy”, failing to pay a deposit and promising to make up lost rent at settlement – which never occurred.

Savvy tenant tips – technology, systems and talk

Most of the new breed of savvy tenants are not scammers, just well-informed, according to Queensland property management consultant, Jade Guilmartin.

The internet gives tenants greater power to negotiate because they can compare market rents across many properties and keep tabs on how long a property had been on the market, she says.

However some tenants take deliberate advantage of “the system”, knowing that eviction is a slow and painful process which can sometimes be further held up with strategic postal “failures”, Jade says.

Such tenants know landlords are unlikely to use debt collectors to chase outstanding rent even after achieving an eviction, while some also set up “injuries” to claim on using no-win-no-fee lawyers.

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However, Jade says a combination of new technology and old-fashioned communication can help in selecting good tenants – and managing ones which present difficulties.

Her tips include:

• Google potential tenants and check out their profiles on LinkedIn and Facebook.

• Meet with potential tenants in person if at all possible.

• Be cautious about references from private “landlords”.

• Call personal and work referees, recording their full names, numbers and addresses in case you have trouble contacting the tenant in future.

• Use open questions when asking other property managers for a reference: “How were they as tenants?” rather than “They were good tenants, were they?”

• Check the tenant is not breaking another lease elsewhere, as it could lead to difficulty paying.

• Take your time over the sign-up process, which should take at least 30 minutes, explaining expectations in detail.

• At sign-up discuss benefits to the tenant of maintaining a good landlord relationship, returning the condition report promptly and keeping a clean rental history.

• Send overdue and eviction notices on red paper to make them stand out as important.

• Be alert to the risk of a law suit “set up” if tenants complain of something as being unsafe but refuse to make a written maintenance request.

• Put your landlord first in the queue to be paid by acting promptly to chase arrears; arrears should be dealt with daily not left in a pile for “catching up on”.

• Treat tenants with politeness and respect even if they are late on rent, but do not let excuses delay your “procedure” of getting started on the formal path towards eviction.

• If you’re having trouble contacting tenants, try a Facebook or text message, which is less confronting than a direct call.

• Keep your paperwork perfect.

Detecting clandestine drug labs in rental homes

Decontaminating a rental home used to “cook”

methamphetamines can cost tens of thousands of dollars – and that’s not counting lost rent, hassle and legal liability if your clean-up is inadequate.

The initial inspection of a clandestine drug laboratory in a Hoxton Park, NSW, rental home cost $32,000, according to EBM Insurance Brokers, which is dealing with a claim on behalf of the owners.

EBM General Manager, RentCover, Sharon Fox-Slater said police discovered the laboratory by chance when

investigating a child abuse allegation; the home was occupied by a family with four children aged under 10. The alleged crooks were careful – gardens were well-kept and the four-bedroom home was immaculate during property inspections, with the laboratory dismantled: “The property manager was astounded.”

Police report drug “cooks” don’t restrict themselves to poor areas with laboratories found in wealthy waterfront properties, suburban houses and high-rise apartments. Clean-ups can cost from a few thousand dollars

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At property inspections, danger signs include: burned or dead vegetation from “cooking” or burning waste outdoors; kitty litter used to soak spills; tubing and containers; tenants who block access to certain rooms; smells; windows constantly sealed; and comings and goings at odd times.

The Managing Director of National Meth Lab Testing, Alan Marsden, said it was almost impossible to tell which potential “Joe Average” tenant might want to run a clandestine laboratory, with clues only detectable once they moved in.

If a property manager suspected a home had been used as a laboratory, it was not enough merely to end the tenancy as contamination posed health risks to neighbours and future tenants.

Police should be called immediately if a lab was suspected or detected, he said, advising any property manager not to enter the home or, if in it, to leave immediately.

His firm was typically notified once police left. They identified areas of contamination and tested levels before making a plan to remediate it -anything from cleaning to removing wall cladding, kitchen units and ceilings – before re-testing and working with authorities to get the home certified as fit for re-occupancy.

In 2010—11, a record number of clandestine laboratories were discovered nationally, according to Australian Crime Commission (ACCC) figures – more than 700. Most were in residential areas.

ACCC Chief Executive Officer, John Lawler, said substances used to make drugs were “toxic, corrosive, explosive and carcinogenic“ and pose a significant and potentially fatal risk to the community.

For more information, see www.nationalmethlabtesting.com.au and the ACCC http://tiny.cc/2rbuew.

Coroner: property managers should check smoke alarms

Property managers should have systems to ensure

smoke alarms are both functional and installed, a NSW coronial inquiry has recommended, but industry response remains hazy.

Smoke detectors vary in quality, type and battery life – with some “hard wired” models needing battery changes only once a decade and others more than once a year. Laws also vary from state to state.

A recent coronial inquiry into the 2010 death of Maxwell Blizzard, 55, in his Hamilton rental home heard his

property manager testify tenants needed to maintain alarms – actually the lease held landlords responsible. There is potential for confusion. Standard NSW Government Department of Fair Trading leases make owners responsible for having alarms installed and “maintained”. Other documents on the same department’s website say tenants are responsible for replacing batteries, which must be fresh when they move in.

Some commercial operators offer regular alarm installation, maintenance and checking, with one example citing an “all inclusive” $99 annual fee online.

Property managers who don’t use such a service or follow internal procedures to ensure alarms are regularly checked – some models can be checked by shining a torch on them, no ladder required – could risk legal action in the event of a fire.

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Barry’s triple relationship with EBM

As a property manager, Barry Lewis used to use EBM RentCover before he joined the firm as a Business

Relationship Executive in New South Wales nine years ago. “I used to promote it to my landlords. It’s more

comprehensive cover than any other around and it’s not just a policy, it’s a whole division of EBM,” he says.

“It’s good knowing you’re selling something worthwhile and having an ongoing relationship with clients. I’m 100% behind RentCover which makes it easy to sell and talk about,” he says. Barry joined EBM Insurance Brokers keen to capitalise on his property management experience without the stress of being

the “ham in the sandwich” tasked with satisfying almost 1,300 tenants and owners associated with his 450-strong rent roll.

He enjoys the autonomy of the EBM role. While he’s often on the road, there’s support from the office and constant contact with clients: “It’s very social even though I’m working by myself. It’s the best of both worlds.” Barry is about to extend his third relationship with EBM RentCover - as a customer; he is building a granny flat to rent out on his corner-block home on the Central Coast. He already buys EBM RentCover on behalf of his mother, whose home is being rented out as she is in a nursing home.

Outside work, Barry enjoys spending time with his adult children and a wide circle of friends.

Barry’s passion for music - and ability to play both guitar and piano - means some gatherings become rock music jam sessions.

He’s also part of a high-performing pub trivia night team: “I cover music and entertainment, another person does sport, someone else is well-travelled – and we all read the newspapers. We save up our winnings until we have seven or eight hundred dollars and go for a splash-out meal.”

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