Property managers' mistakes can be binding on landlords

Most investment property owners rely on professional property managers to look after their rented properties. But it pays to choose that property manager carefully - as it seems property managers' mistakes can be binding on landlords.

A recent Tenancy Tribunal decision shows that picking the right property manager is particularly important.

A Wellington tenant in a fixed-term tenancy due to expire in June 2021 applied to end the tenancy early. The property manager said in writing that the owner agreed to it, so long as the tenant paid rent until a new tenant was found. By mutual agreement, the tenant advertised the property, and found about 20 prospective new tenants.

The problem? Turns out the property owner hadn’t actually agreed to it: the property manager had just assumed they would. The applications of those 20 prospective tenants weren’t processed, and the tenant faced the prospect of continuing to pay rent.

And where does that leave everyone? After weighing everything up, the Tribunal decided that because of the representation made by the property manager, the tenant was only liable for rent up to the point she vacated the premises in February, rather than the original June expiry date. It was reasonable for her to accept that the property manager was speaking with the authority of the landlord.

Had the property manager correctly told her that the landlord did not agree to breaking the tenancy, then it’s likely she would have had to keep paying rent until June.

A good reminder for all to make sure that when you commit to something, you’ve confirmed it properly with all parties—and when you have someone acting on your behalf, you both know when you need to agree on decisions.

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