Letting fees replaced by 'tenancy fees' and 'admin fees' as property managers look to recoup costs

Brian from New Lynn

Property managers are making up for a ban on letting fees by introducing a new charge for landlords. And some of them are suggesting or encouraging landlords to pass the costs on to tenants. Parliament passed a law banning letting fees earlier this month. It comes into force on December 12. Housing and Urban Development Minister Phil Twyford said it would save tenants up to $47m a year and reduce the up-front costs of renting.
In response to the ban, most of the larger property companies say they will pass on the cost of finding a tenant to the landlord. In an email to homeowners, Harcourts said it could not absorb the letting fee because of the extensive work involved in finding new tenants for a landlord. It said it would charge a new fee to landlords from next month. The charge would be the equivalent of one week's rent plus GST, and would come out of the first rental payment after a tenancy changes. "It is anticipated that landlords will attempt to recover the cost of the letting fee through increased rent," Harcourts said. Quinovic Group also confirmed it would charge a "tenancy fee" to landlords, though its charge would be a flat rate of $550 plus GST. Chief Operating Officer Paul Chapman said the removal of letting fees would have "a considerable adverse impact" on the company and it had forced Quinovic to review its charges."Rather than seek to increase our base management fees we have decided to introduce a New Tenancy Fee," he said. He said finding new tenants was time-consuming and costly, and included credit checks, advertising, viewings, tenant selection and reference checks. The $550 charge would recover only part of the costs of finding new tenants, he said. Crockers Property Management said it would introduce an "admin fee" of $20 a month for landlords, which would be charged regardless of whether a tenancy changed or not. Barfoot and Thompson director Kiri Barfoot said the company had not finalised its plans, but it was likely to introduce a letting fee for landlords, probably set at a week's rent."It's a lot of work finding a tenant, and we don't expect our people to work for nothing. So we'll be looking to pass that cost on." It was up to the landlord whether they passed on that cost, she said. Barfoot said the ban on letting fees would likely lead to landlords seeking longer, fixed-term tenancies. "Landlords might be a bit more fussy who they take on. They will say 'If you only want to stay for six months, I'm not going to take that because I have to pay the fee each time'."
NZ Property Investors' Federation executive officer Andrew King said it was reasonable to expect that property managers would need to recoup their costs after the law change. He noted official advice to the Government that landlords would pass the letting costs on to tenants, and that the likely increase in rent would be $10 a week.
"Given that the average tenancy is around two years, this would mean that tenants actually end up paying more than the original cost of the letting fee," King said. "A benefit of this is that the cost would be spread out rather than being the current large and up-front letting fee."
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