Landlords, not tenants, should pay property managers

Thursday, 15 November 2018

Protesters from Renters United gathered outside the Tory St, Wellington offices of a Quinovic franchisee after a series of advertisements that outraged renters was pulled by the property management company.

OPINION: The announcements this week that some property managers will charge landlords a tenancy fee isn't unexpected, given letting fees are now banned.

However, charging a 'new fee' shouldn't be viewed as a negative outcome of banning letting fees either – it's simply reflective of charging landlords for a service that they receive a benefit from.

Placing the cost of filling a rental on landlords is a more efficient way to charge for a property manager than letting fees.

Let's be clear: anyone who expected letting fees to be banned and for the market to continue on without any changes was kidding themselves. Property management companies want to recover the costs of filling a tenancy for a landlord and charging a fee to landlords themselves is a much more direct reflection of who receives the end benefit of the property management service.

* Renters 'like letting fees', property investor group says

Housing and Urban Development Minister Phil Twyford said the letting fees ban would save tenants money.

* What do property managers do?**

Previously, with letting fees, tenants were paying for the service of filling a tenancy – a cost that is really benefiting the landlord rather than the tenant as they have now filled their rental without having to do the administration themselves.

Shifting the cost burden to the landlords themselves makes a lot of sense, as landlords will now be paying for a service which is for their benefit.

It's true that charging landlords a fee might cause rents to rise for tenants, but then again, they are rising anyway. More importantly, landlords build their costs into the rents they charge, so again, increasing rents by a small amount just aligns how landlords recover their costs for everything else associated with their rental.

Under the Residential Tenancies Act, landlords can only charge market rent anyway, so any rent increases above the fair value of costs incurred wouldn't stack up and could be challenged to the Tenancy Tribunal. Further, a smaller charge per week, as part of the usual rental payment, will beeasier for tenants to pay as opposed to a large lump sum at the start of a tenancy. Even without a letting fee, tenants still need to shell out for bond, rent in advance, moving costs and all the other costs associated with starting a new rental tenancy.

Getting rid of letting fees has stopped renters paying for a service that didn't directly benefit them.

Now, the cost burden of filling a tenancy will fall on landlords, who actually gain the benefit from the services provided by property providers. Now, with the cost placed on landlords, one might even hope that there might even be greater scrutiny over the services landlords get from their property managers. Better understanding of the services property managers provide, and the quality of their services, might rein in some of the more cowboy-ish antics we've seen in recent years.