‘Tenancy fees’ replace outlawed letting fees

Letting fees are back, now being levied on investors rather than tenants.

A law change was passed at the start of this month to ban the fees, which are usually equal to a week’s rent plus GST.

The ban comes into effect on December 12.

Housing and Urban Development Minister Phil Twyford said it would save tenants millions of dollars. But now property managers are introducing a fee to replace it, which will be charged to owners.

It has led landlords to warn rents might rise to cover the cost.

Quinovic wrote to property owners telling them that the letting fees had covered the time and cost associated with finding and placing new tenants.

‘‘The removal of letting fees will have a considerable adverse impact on our business and we have been forced to review our owner charges,’’ it said.

‘‘Rather than seek to increase our base management fees we have decided to introduce a New Tenancy Fee.’’

The fee will be set at $550 plus GST although franchisees will have some flexibility.

Chief operating officer Paul Chapman said it was set at a level to recover the costs associated with a new tenancy rather than to maximise income.

Property management consultant David Faulkner, of RealIQ, said all the big property management companies were working on similar measures.

Most were implementing a fee for new tenancies, he said, but some were increasing the percentage commission they took from rent each week.

Andrew King, executive officer of the New Zealand Property Investors Federation, said it would encourage landlords to put their rent up. ‘‘If they can put the rent up, I imagine they will.’’