Is The Ban On Letting Fees In NZ Benefiting The Renter?

When renting any property, the amount of rent you need to pay is the first question that most of us ask ourselves. Questions like, can we afford the monthly payment and can we afford the fees? These questions are still asked today, however, due to legislation changes in New Zealand, letting fees for a tenant are now a thing of the past as of December 2018.

Essentially, prior to December, tenants may have been charged for a tenancy in the form of a letting fee in NZ. Now, letting agents are banned from charging tenants, but might still impose the fee on a landlord. Letting agents had concerns that if letting fees were abolished, landlords would increase the rent of their properties to gain back lost revenue.

There are already many fees that are imposed when a tenant is trying to rent a property. Moving is one of the most expensive aspects of changing houses, so a great many of us look for cheap moving companies to assist us with this aspect. In some instances, we may be looking to rent a property because our new property that we have purchased may not have been completed. In these situations, tenants might looking at self-storage or even storage containers which can be even more expensive. Now that letting fees are abolished for tenants, however, the cost of renting might be easier for many people.

Let’s now look at some of the areas that may benefit the renter as this abolishment comes into effect.

Charging Fees

Letting agents act as an intermediary between the landlord and tenant. They are the third party that affects a prospective tenant. The charge of this checking service, until December 2018, was payable by the tenants. Since the legislation change, this charge could now be passed on to landlords as it has been prohibited to be charged the tenant. Letting agents charge landlords for advertising the property, reviewing applications, property inspections, tenancy agreement preparation and holding open days for prospective tenants to view the property. Looking at the above list it does show that the fees that were charged to tenants previously, should really have been charged to the landlords in the first instance as they were benefiting from what the letting agent was producing. The bond that is charged to a tenant should just cover any damage that is caused by the tenant. Even in their monthly payments that is paid each month, a percentage of this should be for running repairs and damage that can be caused through wear and tear.

The Rent

The rent that a landlord requests for a property is usually worked out by what the average property of that size and type, in a particular area, is usually generating. The amount of rent a landlord requires usually has to cover any loans or mortgages that the landlord may have on the property. There also has to be an element of profit for repairs and for when the property is vacant. In most cases landlords want to make some form of profit on the rent that they are charging. It may not be as much as you initially think, but landlords do not want to make a loss on their investments.

The fees that were once charged in New Zealand would often make the rent of a property seem expensive. Now that these have been eliminated, landlords will now have to look at a way of not losing that revenue. The concern for tenants is that rent prices will increase to counteract the loss of the fees. Additionally, there is also concern that letting agents may decide to do less checking when the charges were abolished.  Meth testing companies were often part of the fees that agents charged to ensure that the full check of the property was undertaken. There had been reassurances that these companies will still continue to do the job they always did.

Renewal Fees

It is not just new agreements that are subject to fees, rental fees for renewing contracts have been in place for many years as well. The renewal of the contract was often deemed as unfair by many renters, as it was often the case of just amending a date and signing the document to extend the contract. Now this process has been eliminated, and it will allow renters to be able to budget accordingly each month, without having the worry of a large renewal fee to deal with at the end of the first contract. It’s this type of change that will really help the housing market in New Zealand. The renewal fee was often regarded as an unfair fee as no work was actually done.

Benefiting the Renter

We have mentioned above some of the aspects that are involved in renting a property. The legislation of December 2018 should prove beneficial to new and old tenants alike. As the fees have been abolished for renters, renters should now be in a position to be able to budget for new properties more effectively and it may even open up the types of properties that are available to the individual. If the rules and regulations are adhered to properly, renters are now in a much stronger position than they have been before. Even if in the worst-case scenario that some of these fees are pushed back to the tenant via increased rent, the rent is still empowered by this change as they are able to look at alternative properties that are not showing increased rental amounts. Only time will tell how this change will affect the rental market but it is definitely a step in the right direction.

As you can see from the above, the change in legislation will hopefully benefit the renter as it was originally intended to do. Only time will really tell how this change has impacted the New Zealand housing market. As with any new legislation, as time passes, the industry will get used to the new way in which fees have been abolished and be able to understand the impact long term.