The Parliament has voted to pass the legislation to ban the letting fee from 12th December onwards.
The housing minister Phil Twyford said that letting fees are unfair for the tenants and banning it will be a good initiative in improvising the conditions for tenants, while in the long run, they are still reviewing the Residential Tenancies Act.
He stated “Our tenancy laws are antiquated and don’t reflect the fact that renting is now a long-term reality for many of our families.
Around half of New Zealanders now live in rented homes. This change could put up to $47 million into the pockets of Kiwi families each year. This will make a real difference to struggling families. There are significant costs associated with moving to a new rental property, which many families are now forced to do every year.”
WHY LETTING FEE IS CHARGED
The letting fee is charged by a letting agent or solicitor to grant or assign a tenancy.
Letting fees were permitted under the Residential Tenancies Act, but only letting agents or a landlord’s solicitor are allowed to charge this fee.
The fee covers the expenditure of putting a tenancy in place. It covers the cost of time and efforts involved by the letting agent. The fee is charged by a company to equalize the work they do in order to find a suitable place for the tenants. Expenditure includes: –
Marketing: –Costs involved in Photography, Videography, 3D Tours.
Advertising: –Posting adverts online, TradeMe, Social Media Platform, Rental Lists etc.
Showing Properties: –Traveling to the property, scheduling viewings, opening and closing the property.
Appraisal: –Visiting the property, comparison with others, drafting reports.
Software: –Managing the database of the tenants, completing background checks, preparing documentation.
Paperwork: –Preparing all the Bond forms, agreements, and documents related to extra clauses.
Evidential work: –Collecting photographs, videos of the property, writing reports etc.
Recommendation: –Recommending methods to enhance the property and to match within the legal compliances. Assisting in making the property more profitable.
The property manager always puts a lot of effort on finding and leasing the property to tenants matching to their demands. A property manager also spends extra time arranging the viewings, reaching first, opening and closing the property doing that exercise several times. The work done should be valued as the property Manager puts in a lot of effort in the job i.e., Managing all the communication of the tenants as well as the landlords, doing all the necessary Credit Check, Reference Check, Background Check. They are responsible for the agreement bonds. Furthermore, they also manage the tasks of collecting all the evidential work such as a written report, Videography and providing their valuable expertise to increase the profitability of the property as well as guide to follow the regulations and compliances.
Chief executive of REINZ Bindi Norwell explains that by banning letting fees it is likely that it may help tenants in the short term, but in the long run, it might result in the costs being passed on to tenants by increasing the weekly rent.
Given the current draft of legislation being directed at landlords, this may contribute to more landlord’s deciding to exit the rental market, she says.
She further stated, “This would further reduce the available pool of rental properties and drive up prices… We continue to call for a balanced approach to avoid harming the rental market in the long term.”
Though the ban of letting fee will benefit the tenants in short term, however experts from the industry believe that in the long run, it’s likely that these costs may be passed on to tenants via an increase in weekly rent.