Rent hikes may replace fees

A rental agency is suggesting landlords raise rents by $6 a week to recoup a fee they will charge when a ban on letting fees goes into effect.

The Government recently passed a law banning letting agencies and landlords from charging tenants ‘‘letting fees’’ at the start of their tenancies.

These fees – typically equal to one week’s rent – went towards the cost of advertising the property and vetting prospective tenants.

Letting agency Oxygen, which manages hundreds of rental properties across the lower North Island, has written to landlords warning them of a new type of fee that they would be responsible for paying rather than their tenants, every time a tenancy changed hands.

This fee comes to $550+GST with a provision to adjust for inflation.

Oxygen specifically suggests passing this cost on to tenants, noting: ‘‘When you are re-tenanting your property you may wish to consider the additional cost when setting the weekly rent; based on the average tenancy of two years, this would equate to $6 per week.

‘‘Your property manager will discuss this with you accordingly.’’

General manager Christian Casbolt, who wrote the letter, told Stuff the agency came to the decision on the fixed fee after consulting with landlords, who supported the decision.

‘‘75 per cent of those asked said user pays are what we prefer,’’ Casbolt said.

He said that despite widespread perceptions of letting agents simply clipping the ticket, a lot of work went into tenanting properties, including online advertising, multiple viewings, inspections, tenancy tribunal hearings, and tenant vetting.

‘‘There’s 19 different steps. We have six dedicated staff across the Wellington region plus physical locations,’’ Casbolt said.

He actually thought the new system of a flat rate made more sense and was fairer than the old system, where different rentals cost different amounts to let out.

‘‘Personally I think it’s a long time coming and its probably a fairer approach.

‘‘Prior to entering the industry I’ve had to pay that fee previously and I think the change is good.’’

National’s housing spokeswoman, Judith Collins, said her party had long warned the change would drive rents up.

‘‘It will not bring rents down, it will put rents up. With rents already under some stress, it will not make life easier for tenants,’’ Collins said.

While some tenants might prefer paying the letting costs slowly over time, it would penalise those who stayed in tenancies for many years, as they could end up paying a lot more than the one-time fee in higher rents over time.

‘‘A tenant who stays three or four years or more will end up paying significantly more. And the people who won’t pay as much are people who chop and change their tenancies,’’ Collins said.

‘‘The net effect is almost no benefit to tenants or landlords.’’

Housing Minister Phil Twyford said it was appropriate for landlords to be charged the fee rather than tenants, as they had the power to seek out the best deal possible.

‘‘It is a service provided to landlords, not tenants. Unlike vulnerable tenants competing for rental properties, landlords are in a position where they can ensure they are paying for exactly the services they are receiving,’’ Twyford said.

‘‘Landlords don’t have to pass on these costs and many of them won’t.

‘‘Reserve Bank research shows that in New Zealand rents are driven primarily by supply and demand.’’