Letting fee change comes into effect

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

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

Renters United spokesman Robert Whitaker said this would make life far fairer for those struggling to find a good home.

He said that upfront cost could be a real barrier — particularly for lowincome renters and students who moved 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 will just charge landlords the fee instead, the way it is done overseas, which could mean costs fall back on renters.

Barfoot and Thompson director Kiri Barfoot said they ran a business and provided a service, and it did not worry them who paid for it.

‘‘There are 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 would 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 homeowners may choose the option of ditching the letting agent to avoid the fee, but the Real Estate Institute believes it more likely they will pass the costs on to tenants through incremental hikes in rent.

Chief executive Bindi Norwell said it might not be the Christmas present renters were hoping for.

‘‘They may pay more over a 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.

Housing Minister Phil Twyford believes 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 said it was unlikely people would 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.’’

However, Ms Barfoot said more than half of landlords used managers for their property.

National Party housing spokeswoman Judith Collins said it was almost guaranteed they would 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% to 4% return . . . so that’s why they have to pass it on.’’ — RNZ