The government are banning letting fees from the 12th December 2018. Many property management companies rely on this income stream to keep their business running which can be approximately 12% of their revenue.
They are going to need to recoup this lost income and if they can't charge the tenant then it is likely that the owner will get charged instead.
A letting fee is a fee that can be charged by a property management company or solicitor to cover the costs by putting a tenancy in place.
This includes the time for having showings, reviewing applications, preparing agreements and the initial property inspection.
Generally, it's one weeks rent+gst and this is a fee that gets charged currently to the tenant and paid to the letting agent or solicitor.
The letting fee will likely be passed on to the owner in one way or another. There are a number of options but below we have highlighted the most likely to occur.
1) The property management company charges the letting fee to the owner instead of the tenant each time a new tenant is found.
2) The property management company increases their management fee % to the owner.
On average tenancies last approximately 2 years. Some are longer and some shorter (city apartments). Looking at the letting fee over a period of 2 years it looks likely the management percentage would need to be increased by approximately 1%. Below is what that increase will look like.
3) The property management company charge extra fees.
We often come across property owners that say they are currently being charged x percentage for their management fee but do not look at the overall fees they get charged. Some commonly overlooked fees are:
Written by Gary Turner - Pukeko Rental Manager Auckland Central & CBD