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Thanks for your comment ip freely, I totally agree with that, the problem in this case did revolve around errors in assessment.
Just for info of others who may visit this topic DHA have agreed with my valuation and have refunded all my costs involved in obtaining a settlement on a voluntary basis. The Managing Director personally called me to discuss the issue and certainly indicated that inaccurate valuations are a problem area for them. I must say that I was impressed with his approach to customer service and the fact that a letter of complaint can get this sort of action bodes well for the customer service standards of DHA (gotta give credit where it's due).
I am led to believe that the neighbours have also had a good result despite not appealing their valuation in contract stipulated time limits based on the requirement of DHA to apply known errors to the benefit of all other similiar contracts under the principles of contractual good faith.
Cheers
IP Freely wrote:pitto wrote:
Clearly having knowledge of the rental valuation for exactly the same type of property and then withholding this information from another owner would be held to be in breach of this duty. That's not to mention that not doing so is in breach of DHA's customer service charter and morally debatable from a government agency .Cheers
Pitto, this is only a valid argument prior to other owners accepting the rent proposed. Once there has been acceptance, there is no further obligation on the parties to revisit the rent. With the rent review process 'time is of the essence', if an objection hasn't been made then the offer is accepted, if you have objected but your neighbour has not, then your process does not affec t your neighbours. There is no duty owed to the lessor where the lessor has accepted a review and other parties are objecting to the review, subject of course to when you have lodged your fully documented objection identifying other market rentals.
However, those rentals which other have identified and the lessee has accepted as comparable market evidence, may be considered in future rent reviews if those rents are still current and reflective of the market.
Thanks for your info IP freely, but what law are you relying on to contend this? Sounds to me like opinion rather than the law, however, I am happy to stand corrected if you can tell me what binding courts have decided that the duty to act in good faith is overidden by a timing issue or acceptance of a rent under a mistaken belief in a state of things. If you are going to enter into a discussion of this nature it does little to legitimise your argument by not quoting the relevant case law to support your contention.
As I said, I'm happy to discuss the basis of your legal argument when you support it with precedent as I have done to support mine, otherwise unfortunately you simply have an opinion without basis in law.
Cheers
IP Freely wrote:Pitto, it is not up to DHA to increase the rents on all properties if you have successfully argued an increase/difference in valuation on your property. This is not in the best interest of the tenant (DHA has sold you the property and is leasing it back from you with an agreed mechanism for rent reviews).If the adjoining property owner is unaware of the rent review mechanism or is satisfied with the review that they have recieved, then they will not need to get an independent valuation done. The timing of the rent review may differ from yours, the terms of their lease may also differ or they may not be in a position to argue for a small net increase in rent (after the cost of valuers).
Hi IP Freely,
Rent review time and premises are exactly the same, they have the same fixtures and fittings.
Without getting into a lesson in contract law and specifically provisions relating to the treatment of all parties with "good faith", it is incumbent on all parties to this contract to treat each other with the utmost good faith. This has been determined by numerous courts as to require more than what you think which is basically the law of "buyer beware". The contract specially requires each other to act in this way and precedent would be best encapsulated as follows:
Another approach, referred to by Dr Peden and frequently cited, is that of Sir Anthony Mason in his Cambridge Lectures, 1993 (and see his article “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66).
Sir Anthony suggested that the concept of good faith includes the following elements:
(1) An obligation on the parties to co-operate in achieving the contractual objects (loyalty to the promise itself).
(2) Compliance with honest standards of conduct.
(3) Compliance with standards of conduct that are reasonable having regard to the interests of the parties.
That definition (perhaps more accurately, explanation) commended itself to me in Tomlin v Ford Credit Australia [2005] NSWSC 540 at 116.
Clearly having knowledge of the rental valuation for exactly the same type of property and then withholding this information from another owner would be held to be in breach of this duty. That's not to mention that not doing so is in breach of DHA's customer service charter and morally debatable from a government agency .So hope this helps you understand a little better DHA's obligations in this regard are somewhat higher than a normal rental contract, notwithstanding the fact that good faith is implied in every contract, specified or not.
Cheers
Hi trustieone,
Yes they backdate rent to the start of the calender year when the rentals are varied. No loss to you except the independant valuation fee and the time you take in the process.
Interesting question about nearby properties, I know the place next door is a DHA rental and am currently obtaining evidence from the owner regarding his rent. If they don't increase other rentals in line with the new information it would add substantial weight to my argument that DHA are deliberately trying to minimise rents and not acting in good faith towards their owners.
I have just written to the Managing Director of DHA re this and intend to follow-up with the Commonwealth Ombudsman if I don't get any satisfaction as I really don't want to have to go through this every year.
CheersJust an update, our valuer came back with a rent of $525 per week, that is $55 a week more than the DHA valuer.
It will be interesting to hear from DHA, frankly I don't know how they don't get embrassed when they get caught out like this. They say that 99% of people are happy with their valuation, make that either happy, ignornant of the correct price or not concerned enough to do anything about it.
Repeat word of caution, watch your rental valuations if you have a DHA property.
Cheers
Hi,
In answer to your questions
IP Freely wrote:Pitto, there is usually a dispute resolution mechanism in the agreement eg a third independent valuer appointed to adjudicate or the two valuers come to some agreement as to which are the most appropriate/comparable premises, does such a clause exist in your management agreement?The 2 valuers attempt to reach agreement as per the process. If no agreement can be reached a secondary process exists where a valuer is appointed by the State regulatory body and a hearing held. Costs of this are shared between DHA and the owner.
Are the rents nominated by yourself the advertised rents or the deals which have been communicated to your valuer by their network?Most of these are the rents achieved for these properties, 2 are advertised subject to confirmation.
Does the reported rent include any incentives to the lessee? eg rent free period
No
Have you taken into consideration the basis for valuation ie how the rent is to be determined (vacant possession, sitting tenant, comparable market rents etc)?
DHA contracts specify market value rental for similiar properties as at 31/12 as the basis of valuation
In answer to Defence Housing's justification of their valuation process I understand that on a superficial basis the valuation process is independent, however, anyone that believes that a valuer with a contract to value such a large number of homes each year is not subconsciously biased towards their client (in the hope of retaining the large & lucrative contract) is living in la la land. I further find it extremely difficult to believe that the Defence Dept. do not place some pressure on DHA to minimise the rental cost paid by them as opposed to the subsidised amount paid by the tenant.
Yes a review process is offered but unless you keep an close eye on rental values how would you know whether to appeal or not. It also costs money $375 last year and $440 this year to hire your own valuer. Further it is not easy with most properties to gain direct comparison as I am able to. Here is what the valuer from DHA used this year to value our property:
3 bed unit Jindalee – inferior type $410
4 bed home Sumner – comparable type $445
3 bed unit 17 Mile Rocks – superior type $570
Not 1 property from within the same complex or even suburb. This is despite there having been upwards of 8 units within the same complex rented during the year. Direct comparison units were available, I was able to find them but a licensed valuer obviously wasn't or didn't care enough to look. For the record all of these from the same complex as mine and directly comparable:
3 bed units – inferior type $450, 450, 470, 460 (4 advertised)
3/4 bed townhomes – exactly same type $520, $560 (2 adevrtised)
4 bed detached homes – superior type $595, $595 (2 advertised)
DHA then offered me $470 a week a rise of $5 for the new year. I could list last years as well but the low rent jist is the same. At least the valuer last year got properties from within the complex, they just valued our unit based on prices lower than the inferior type units were being rented at.
I REPEAT MY WARNING TO ALL PROPECTIVE DHA PURCHASER'S. 2 YEARS IN A ROW OUR VALUATION HAS BEEN AT LEAST $50 PER WEEK SHORT OF THE GOING RATE, I DO NOT THINK THIS IS A COINCIDENCE. THESE PROPERTIES CAN BE A GREAT INVESTMENT BUT YOU NEED TO KEEP A CLOSE EYE ON THE RENTAL VALUATIONS.
Be careful and do your homework.
I have had a DHA property in Brisbane for 2 years. My opinion on the main issues raised are:
1. Price – the properties are usually higher than market value but you can win here with a bit of research and some patience. We paid $450,000 for our property (this is in a complex amongst the same type of properties so it is easy to value), it had been listed on the website for sale for at least 4 months. It was about $20,000 over the odds when listed but over the intervening period the price of private sales of the same properties rose and one exactly the same as ours sold for $479,000 just before our contract went through. You really have to be lucky though. A lot of these properties sell very quickly and we missed a number of properties before deciding to look at this one so getiing this under the odds was a combination of luck and patience.
2. Rent – It is valued on 31/12 of every year by a supposedly independent valuer. Our initial rent was $375 and in 2008 it was increased to $410. This was way below par and we invoked the appeal process under the contract. Our valuer came back at $480 per week and we eventually agreed to $465 a week. The process was relatively easy but cost me $375 for the independent valuer despite the fact that we were right. Just got our new rent valuation which they reckon has gone up a whole $5 per week to $470 a week (many people in Brisbane will be astounded to know that rents have only increased by 1.05% over the year!!!!!!!!!!!!!!) . No doubt we will be appealing again as my property type is achieving rents in excess of $500 per week. It is my opinion that DHA try to keep rents down and you need to keep a close eye on them and I suppose this is natural when they have 11,000+ properties. We keep all evidence of rents advertised during the year (once again we are assisted by the fact that there are only 3 types of property within the complex which makes direct comparison easy) from http://www.realestate.com and http://www.domain.com.au.
3. Lease Fees – Units pay 13.5% gross rental for lease and repairs and maintenance. I reckon this is a great deal having a current average of 18.6% on agent costs, repairs and rental vacancy periods on our other non DHA rentals. I read the Access Economics report that a previous poster pointed out. I agree with most of it's conclusions and the lease fees are more than reasonable in my opinion.
4. Set and Forget – Apart from the previous comments about having to monitor the rents offered closely, this truly is a set and forget investment. We have never had such a worry free property investment and we simply do not think about tenants, property maintenance etc. with this place. The new paint, floor coverings at the end of lease is another bonus that will save $$$$. This is a more than welcome change and is nearly enough to convince me to buy another property by itself.
5. Capital Growth – This depends on what and where you buy like every other property investment. Like every other property investment buy the best located property you can afford and you should get reasonable capital growth. We are looking at about 12% per year at the moment which is obviously slowing down rapidly.
6. Lease – Ours is a 12+3 which is exactly what we wanted. 12 years (at least 11 years with the 1 year early get out clause) of rent paid for every day is value.
You need to watch the rent reviews closely and make sure that you have a good knowledge of the local rental market as you cannot trust DHA's so called independent valuer. This is the only downside though so all in all a good investment brought about be being a bit lucky with the purchase price.
CheersPitto
