Monday, November 8, 2010

Does your property manager know to ask you?

This week I’ve had a potential client who was saved from paying way too much for an illegal house conversion. They were considering buying a house which had been converted into two flats, and wanted us to come do a rental appraisal to check the rental figure quoted was indeed 'on the money'. My first question was "does the council know it is two flats?". "I don't know," said the potential investor, "where can I find out?". A quick trip to the council buildings had them armed with what they needed to know. Unfortunately, the council did know about it, and they were not happy at all. If the investor bought it, they would need to bring it up to spec, and it wouldn't be cheap to do so.

They could have still tried to buy the property at a fair price and do the work needed, but as ‘low maintenance’ was one of their selection criteria, they walked away. I’m glad they knew themselves well enough to do that. We could have handled a project like that for them, we have before, but they knew this would not be their best introduction to investment property.

I wonder if the person who does buy that house/those flats knows what they are getting themselves in for. Under the changes to the Residential Tenancies Act (RTA) in force from 1 October 2010, the property needs to 'comply with all requirements in respect of buildings, health, and safety under any enactment so far as they apply to the premises'. Without fire-proofing between the flats, it can't be rented as two separate dwellings. The owner could be fined exemplary damages of up to $3000 under the RTA. If the worst case scenario happened, the RTA would be the least of their worries, make no mistake.

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