Q: I just bought an investment property in Cairns, but I live in Melbourne. I appointed the property manager from the same agency that I bought the property from. The property manager has signed up a new tenant a lower rent than what we agreed on - we discussed $180-$200 per week, and she has signed someone for six months at $165 per week. What can I do?
A: When you sign up with a property manager, you essentially sign an agreement which hands over the rights to that manager to seek a tenant, and to obtain a 'target' rent which you both agree upon. While it is certainly best practice for the property manager to discuss with you any planned reduction in rent, a standard NSW agreement, for example, does not state that as a requirement - the agent could suggest that, rather than leave this property vacant, they were acting 'in your best interests' to secure an available tenant at what they may consider to be the market rent.
To prove otherwise, you would need plenty of evidence that there were an abundance of available tenants who were all willing to pay more than the $165, and evidence that other similar properties are currently letting for that amount. You would then need time and money to get this dealt with, and for the sake of a total of a $360 difference over six month, it is an action that would not be worth your time, money or stress!
Having said all of that, this behaviour does not excuse the property manager for not being both courteous and prudent by giving you the option to either take the lower rent or hold out for a higher paying tenant. While you may not terminate the lease with the tenant, you can certainly terminate the agreement with the manager and immediately find a new one. You probably have a 30 day's notice clause, but if I were you I would threaten legal action if they do not let you out immediately, and take your business elsewhere. While this will not get you any more rent, at least it will teach them a lesson next time.
As landlords, it is crucial that we read every document in its entirety and in fact, make changes where we are uncomfortable. Most people believe that just because a contract is in black and white it is concrete, but nothing could be further from the truth. I always have no hesitation in deleting anything I don't like, adding anything I do want and sending the contract back to the manager! If they are not happy with my changes, then they do not have to counter sign, and I can find someone else.
Typically, I will usually negotiate the management fee (at least until they prove themselves, usually for a period of six months), the termination period (never allowing any more than two weeks) and I ensure that the clause states that I must be consulted about the amount of rent before it is accepted. This way, I always have recourse in the event that the manager does not perform. I haven't had a manager yet who has not agreed to the changes, as the world of property management is very competitive and real estate agents are often valued by the size of their rent roll.
Margaret Lomas, director of Destiny Financial Solutions, is a qualified Financial Adviser and author of a number of books about property investing. Her newest and most exciting book to date, 'The 20 Must Ask Questions® for Every Property Investor', was released on April 1. Visit: www.destiny.net.au
