12 Dec 2018

Letting fees come to an end

6:52 am on 12 December 2018

Renters throughout the country are rejoicing at the official end of letting fees.

House  with "For Rent" sign in front

From today, the law that bans letting agents and property management companies from charging a fee to tenants for their services comes into effect. Photo: 123rf

From today, the law that bans letting agents and property management companies from charging a fee to tenants for their services comes into effect.

Renters United spokesperson Robert Whitaker said this will make life far fairer for those currently struggling to find a good home.

He said it's that upfront cost that can be a real barrier - particularly for low income renters and students who move around a lot.

"The first thing is, they can actually compare apples with apples in the rental market and not have to worry about letting fees being piled on top of all of their other moving costs," Mr Whitaker said.

But some companies say they'll just charge landlords the fee instead, the way it's done overseas, which could mean costs fall back on renters.

Barfoot and Thompson director Kiri Barfoot said they run a business and provide a service, and it doesn't worry them who pays for it.

"There're costs to find tenants for a property and someone has to pay for it, so if we can't charge the tenants, landlords will be looking to pay."

Ms Barfoot said they'll start charging that way from today.

"Like anything [landlords] can do it themselves if they want, they've always had that option, but most or over half, do choose to use property management services," she said.

Some home-owners may choose the option of ditching the letting agent to avoid the fee, but the Real Estate Institute believes the more likely outcome is they pass they costs on to tenants through incremental hikes in rent.

Chief executive Bindi Norwell said it mightn't be the Christmas present renters are hoping for.

"They may pay more over longer term, so even if they put rents up $10 a week over two to three years, which is a typical time that someone may rent a property, that will be more than that upfront cost.

"It's just bearing that in mind, which may suit some people more," Ms Norwell said.

That's the Minister Phil Twyford's argument - no upfront cost, regardless of whether that cost comes back long term, is a far better outcome for tenants.

"The previous way that these letting fees were handled was totally unfair to tenants. They were hit with one week's rent plus GST at the very time they could least afford it. When they were having to pay rent in advance and bond and all the costs of moving."

Mr Twyford also believes it's actually unlikely that people will end up paying more.

"Landlords are already charging as much as they can within supply and demand. So it's not at all clear that because the small minority of landlords who use property managers want to pass on those fees through rent, it's not at all clear that they'll be able to."

Ms Barfoot had different numbers to the minister, saying over half of landlords use managers for their property.

National's Judith Collins said it's almost guaranteed they pass the new costs on.

"There is very little money these days as a landlord in the property, particularly if it's got a big mortgage on it. There's very little money at all, about a 3-4 percent return," she said.

"Now that this government is coming in with even more things like a capital gains tax*, there's not a lot of money in it - so that's why they have to pass it on."

*The Government has not implemented a Capital Gains Tax, but it is up for consideration by the Tax Working Group led by Sir Michael Cullen.