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Victorian ‘accidental investors’ caught off guard by rental obligations
Victorian landlords have been increasingly dependent on their real estate agents' advice regarding renters’ rights, damages, and maintenance costs, highlighting a gap in investors’ knowledge in a state where regulatory changes are rapid.
New data revealed that many Victorian landlords have been lacking an understanding of their fundamental obligations to renters, often relying on agents to assist with costs, maintenance, and tenant complaints.
The report from the Consumer Policy Research Centre (CRPC), entitled ‘Renting in Reality’, showed that ‘accidental investors’ – those who did not intend to acquire property but did so as a result of life circumstances – were particularly unprepared to cater to tenants’ needs.
According to the report, a survey of 300 Victorian landlords found that four in five (80 per cent) relied heavily on their agent to identify repair and maintenance needs in their properties.
The data showed that accidental investors expressed the lowest confidence, at 32 per cent, in understanding their landlord obligations and the law, while reporting having trust and a positive relationship with their agents at 88 per cent.
The report also found 41 per cent of landlords faced issues with rental applications, while 27 per cent of accidental landlords left tenant complaints unresolved in the past year.
Barry Plant senior property manager and licensed estate agent, Adrian Lieschke, said that a lack of education was to blame, particularly for first-time investors who find the rules and regulations confusing.
The report revealed that 70 per cent of all surveyed landlords felt the need to know tenants' Victorian Civil and Administrative Tribunal (VCAT) complaints’ history, although prohibited during the rental application process.
To educate themselves on rental laws and guidelines, Lieschke encouraged landlords to utilise all available resources and contact real estate experts to help them navigate the regulations.
“Having the right people in your court to know the answers to what you need to know, just engaging those professionals and reaching out to them for advice that helps those parties negate that sort of space,” he said.
The data also showed that, in general, landlords have been largely unprepared to deal with rental property costs, including increases in property expenses (27 per cent), managing repairs and maintenance (24 per cent), and the costs of those repairs (13 per cent).
Accidental investors were found to feel particularly overwhelmed by the burdens of maintenance costs, reporting moderate to high stress levels about their property at higher rates than other landlords.
Lieschke said that he had seen many investors neglect to consider the costs before deciding to purchase property, only to realise the actual financial burden of the decision.
“I see people buy investment property, and sometimes after 12 months, invest their money elsewhere,” he said.
“So a lot of costs are important to a lot of owners as well, and they obviously want a return on their investment and decent yields.”
Ultimately, he advised investors to consult with financial advisors and accountants to help them navigate the costs associated with the property.
Additionally, the report found that surveyed landlords have also been struggling with bond management, with 28 per cent reporting issues such as needing to make a claim for tenant-related damage.
While landlords have relied on agents, 39 per cent of those who experienced bond issues had their properties managed professionally, compared with 34 per cent of younger, self-managed investors.
Lieschke said that when it came to bond processes, many landlords were unaware that Victorian laws were primarily in favour of renters, with many believing tenants were required to cover the entire cost of damage.
He added that, given the rapid changes in state regulations, it has been pivotal for landlords and agents to stay up to date with the latest advice from Consumer Affairs Victoria (CAV).
“[Landlords] don't understand things like the percentage of - let's say, a renter damages a wall, VCAT will only award damages based on the percentage of the area that the renter has damaged,” he said.
“A lot of owners feel that the renter is going to cover that full cost – VCAT are only going to award a percentage. Again, that's probably down to education,” he concluded.