Rethink letting fees ban

Wednesday 28 March 2018

Don’t ban letting fees – instead the option to have a fee should remain and whoever gets the benefit from it should pay for it, investor advocates suggest.

By Miriam Bell

The Government has introduced legislation into Parliament which will ban the charging of letting fees to tenants.

Housing Minister Phil Twyford says banning letting fees will help to improve tenants’ lives while the Government continues with its review of the Residential Tenancies Act.

Twyford has rebutted claims that the ban could lead to higher rents, pointing to Scotland as evidence of this.

However, the NZ Property Investors Federation disputes Twyford’s take on the Scottish letting fee ban.

According to the NZPIF, while one study shows the Scottish letting fee ban didn’t result in rent increases, other studies indicated rents had increased and others were inconclusive.

NZPIF executive officer Andrew King says that rather than banning letting fees, Ireland, Wales and also England (to date) require letting fees to be displayed so costs are transparent to tenants.

“An alternative could be to follow suit and require fees to be displayed, and perhaps allow the letting fee to be paid off over, say, a six month period to reduce the impact of moving costs.”

But, ultimately, the NZPIF believes that whoever gets the benefit of the letting fee should pay it, he says.

“So 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 because it makes the process easier for the landlord.

“Likewise, if it is hard for tenants to find rental accommodation 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 NZPIF is also not convinced that banning letting fees will impact on as many tenants as the Government believes.

Ministry of Business, Innovation and Employment bonds data shows that of the 175,081 bonds lodged in 2017, 53.6% were lodged by property management companies.

King says that while a large proportion of those companies would have charged a letting fee, not all would have.

“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.

“That means tenants currently have a choice of whether they pay a letting fee or not.”

Read more:

Letting fees to go 

Rental squeeze to intensify 

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