December 12th 2018 has been announced as the likely date that property management agencies will be prohibited from charging a Letting Fee to tenants.
What you do from here?
Should this legislation go through some have suggested that selling your rent roll is advisable, or simply you will need to adjust without your letting fee income and make up for it in other owner charged fees, even possibly inflating your management fee to compensate.
We DON’T BELIEVE this is necessary!
We believe you should be passing the Letting Fee onto owners upon legislation change.
When this occurs you will need to advise them in a letter of the changes, or if your management agreement requires, a new management agreement signed and returned. You must also give adequate notice of any fee changes, in accordance with your management agreement as well.
This, of course, depends on the management agreement and clauses already in place. Please seek independent legal advice if you’re unsure here.
In your notification letter advising of the changes to owners, it’s important that the first part of the letter justifies why you need to pass this on.
Here are some words that may assist you drafting your own notification letter.
You’ll need to add your own information and amend the letter to suit, however, these words should assist you and be a good guide.
Dear (salutation),
Subject- Changes to Letting Fee Legislation.
We wish to advise you that up until now, the Letting Fee (the work involved to secure a new tenant for your property when it is vacant) has been passed onto the tenant.
New Zealand Residential Tenancies Legislation has now been amended as at (enter legislation date change) and we can no longer charge the tenant a Letting Fee. It is also clear this fee cannot be recovered any other way from tenants.
The Letting Process to secure the right tenant is overall an exhaustive one as it is the biggest process any property management agency can undertake.
This involves showing the property a number of times to secure the right applicant, processing of the application, creating all the lease documents, conducting the ingoing/initial inspection and create a detailed report and then personally induct the tenant to the lease and all the right expectations for a successful tenancy.
This can take anywhere up to 10 hours of our time, sometimes more.
Regretfully we are unable to absorb this Letting Fee which will be charged at (enter your fee cost here) due to the extensive work involved and therefore we do need to pass this onto our owners as at the legislation change date of (enter legislation change date here).
This Letting Fee will be deducted from the first payment of rent we receive from any newly secured tenant and will be indicated on your monthly statement for that month, if and when this occurs.
We thank you for your understanding in this matter as this issue is outside of our control.
Should you have any questions please call me on (number) or email (email address)
Yours Sincerely
Other useful articles related to the NZ Letting Fee changes.
[Script #1] How to respond to ‘But the other agent isn’t charging a Letting Fee’
[Script #2] What to say and expect when current owners call you about your new Letting Fee
How to answer ‘Why can’t you just charge me a FIXED Letting Fee’
