Property managers are being advised to ditch landlords who haven't insulated their rental properties as both could potentially be liable to a fine of up to $4000 each.
The Real Estate Institute of New Zealand (REINZ) chief executive Bindi Norwell said it was not just a fine but property managers could suffer reputational damage if they were found to be non-compliant.
Her comments followed the Residential Tenancies Act coming into effect from July 1 that required landlords to put underfloor and ceiling insulation in their rental properties where reasonably practicable.
The Northland Property Investors Association believes the rate of non-compliance in the region would be more than one third due to a last-minute rush to have properties insulated as well as the costs involved.
The Ministry of Business, Innovation and Employment (MBIE) said the Act did not allow for extensions, and landlords have had three years to have their rental properties insulated.
"Ultimately it's the landlords' business decision but we're erring on the side of caution by advising property managers that it's best not to work with non-complying landlords," Norwell said.
She said REINZ was already seeing some investors exiting the rental market due to costs associated with complying with the Act.
"Them leaving is the cumulative effect of so many changes, including healthy homes, and landlords think they are not making enough money to stay in the business."
Norwell said the industry had done a good job and estimated 80 to 90 per cent of landlords meet the standards required by MBIE.
Landlords could expect random checks and audits.
A third of the rental property owners under the Property Investors Federation use a property manager.
The federation said it was fair to say some landlords assumed the property manager was managing the property for them and should have actually told them what the regulations were and if they in fact met them.
Under the Act, landlords with more than one tenancy may face separate damages for each property that doesn't comply.
They will still need to install insulation that meets the correct standard.