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Over half of rentals don't have a letting fee

Over half of rentals don't have a letting fee

Government is looking at introducing a law banning tenants from being able to pay a letting fee when securing a new rental property.

A tenant advocacy group in Scotland called Shelter, successfully lobbied to have a ban on letting fees introduced in that country in 2012. Shelter then produced a report in 2013 which showed that the ban was successful and did not result in rental price increases.

However some studies indicated that rents had increased while others said the evidence was inconclusive.

Ireland and Wales looked at following Scotland's lead in 2013 and 2014. However both rejected the move. Instead they did require fees to be displayed so that it was transparent to tenants what their costs would be.

England also said it would introduce a ban on letting fees in 2015, but to date has just followed Ireland and Wales in requiring all fees and costs to be displayed.

In Germany, letting fees amount to 3 months’ rent and this is one of the reasons why German tenants do not move from their rented homes as much as tenants do in other countries.

Rather than banning tenants from paying the fee, the NZ Property Investors' Federation (NZPIF) believes that whoever gets the benefit of the fee should pay it.

If a landlord contracts a property manager to find them a tenant but not continue to manage the property, then they should pay the fee. Under the current system, if it is difficult to find a tenant, landlords will often pay the fee to make the process easier. Likewise, if it is hard for tenants to find rental accommodation (as it is at present) then the tenants should be able to pay the fee so they increase their choice of property and their chance of securing a rental.

The Ministry of Business, Innovation and Employment states that "in 2017, of the total 175,081 bonds lodged, 53.6% were lodged by property management companies and it is likely a large proportion of them charged a letting fee.”

As owner managers cannot charge a letting fee, that means that more than half the properties let last year did not have a letting fee attached to them. Tenants currently have a choice of whether they pay a letting fee or not.

The Government will be put the issue before a Select Committee meaning that the public will have a say in the matter before any law is introduced. 

The NZPIF accepts that paying all the moving in costs of a new tenancy is difficult.  Even if rental prices do move up a little, spreading out the cost for tenants will still be a benefit for them. Unfortunately this will affect all tenants rather than the half that currently pay a letting fee.

An alternative may be to follow most of the UK and require fees to be displayed and perhaps allow the letting fee to be paid off over, say, a 6 month period to reduce the impact of moving costs.


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