No letting fees? No problem.

Stuff reports that there are now no letting fees on rental properties. There are ‘tenancy fees’ instead. quote.

Letting fees are back,?now being levied on investors rather than tenants.

A law change was passed at the start of this month to ban the fees, which are usually equal to a week’s rent plus GST.

The ban comes into effect on December 12.

Housing and Urban Development Minister Phil Twyford said it would save tenants millions of dollars.

But now property managers are introducing a fee to replace it, which will be charged to owners. end quote.

Not exactly rocket science this. Property managers have to be paid for what they do. So if the tenant doesn’t pay, then the landlord will have to. quote.

It has led landlords to warn that rents might rise to cover the cost.

“Rather than seek to increase our base management fees we have decided to introduce a New Tenancy Fee.? The New Tenancy Fee will cover the cost associated with finding and placing new tenants.? We will discuss this fee with you prior commencing the search for a new tenant.? Our intention will be to deduct this fee from the first week’s rent of the new tenancy.” end quote.
At a cost of approximately $550 (plus GST) per let, that makes a nice round extra $10 per week on the rent. Simple. Tenants who stay more than a year in the property would have been better off paying the letting fee, as the extra $10 per week will not go away once the cost of the letting fee is covered. It will be a windfall for the landlord.?quote.

Property management consultant David Faulkner, of RealIQ, said all the big property management companies were working on similar measures.

Most were implementing a fee for new tenancies, he said, but some were increasing the percentage commission they took from rent each week.

For many the letting fee would be 15 per cent of their income, he said.

“If you say we can afford to take a hit of 15 per cent you’re basically saying we’ve been ripping you off for years, and that’s not the case. Landlords are going to have to pay.” end quote.

No. Ultimately, one way or another, tenants are going to pay. quote.

“If they can put the rent up, I imagine they will.”

Chapman said it was an inevitable effect of the ban. “At the end of the day landlords are there to run a business. If there are costs levied against them they need to recover that.” end quote.

In Auckland and Wellington, where rentals are scarce, that is exactly what will happen. It is not just the main centres that have rental shortages these days though. Even some of the smaller towns are feeling the squeeze. Which means that rents will rise there too. quote.

It said there was a risk that tenants could end up bearing the cost, anyway – although there was no clear international evidence for that.

“In the event letting fees were passed on in the form of increased rent, at the current national average weekly rent of?$452?for tenancies managed by property managers, $9.99 per week would be added to rents over a one-year tenancy. While not necessarily desirable, tenants are likely to find the cost easier to pay when spread over the course of the tenancy rather than in a lump sum along with all the other costs associated with moving into a rental property.” end quote.

Whether it is easier to find the money weekly or not, as I said, this policy will result in tenants paying more in rent. They may struggle to find an extra $550 in tenancy fees upfront, but they will pay more overall for this badly thought out policy.

Personally, I am over it. Time to stop being a landlord and to sell the rentals. It is just all too hard. Our rental properties are in a town that is now experiencing a rental shortage. I suggest that things are only going to get worse for tenants in most places.