Letting Fees To Be Banned

Letting Fees To Be Banned!

New Law

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.

First off, what is a letting fee?

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.

How much does it cost and who pays?

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.

How is this change likely to impact you as a rental owner?

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.

  • $500 rent per week = $575 letting fee charged to the rental owner
  • $700 rent per week = $805 letting fee charged to the rental owner
  • $900 rent per week = $1035 letting fee charged to the rental owner

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.

  • 7.5% +gst = 8.5% +gst
  • 8% +gst = 9% +gst
  • 8.5% +gst = 9.5% +gst
  • 9% +gst = 10% +gst

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:

  • Inspection fees – $40 +gst every 3 months
  • Maintenance charges – 7.5 to 9% +gst
  • Water/rates/insurance charges – 7.5 to 10% +gst
  • Tenancy tribunal attendance fee – $40 to $60 +gst an hour
  • Admin fees – $10 +gst a month
  • Advertising – $50 to $150 +gst
  • Credit checks – $15 to $30 +gst

Something to think about as a rental owner

  • Has your property manager notified you that this is happening?
  • Does your property management company charge letting fees?
  • What sort of impact will this have on you and your investments?

If you do want to explore your options or want to have a chat about how we can help you click here to get in touch.

  • We do not charge letting fees to our tenants and will not be charging the owner.
  • We provide rental guarantees for our rental owners so they sleep easy knowing we have it covered.
  • We do not charge extra for our quarterly inspections or organising maintenance.
  • We do it all, plus we hold showings outside normal hours to get you the best tenants.


Written by Gary Turner - Pukeko Rental Manager Auckland Central & CBD

gary turner

© Pukeko Rental Properties 2022