No more letting fees

Under the Residential Tenancies Act 1986, letting fees covering the costs incurred by letting agents (usually property managers) have been able to be charged to tenants.  A letting fee is any charge relating to granting, continuing, extending, varying, renewing or assigning or sub-letting under the tenancy agreement.  Under the Residential Tenancies (Prohibiting Letting Fees) Amendment Act 2018 (“the Act”), in force from 12 December 2018, the charging of letting fees will be banned.

The Bill was introduced on 22 March 2018 and received Royal assent on 6 November 2018.  The timeframe between Royal assent and commencement has been shortened from the prior commencement date of 3 months following Royal assent, to coming into force on 12 December 2018.  This is as New Zealand’s tenancy turnover is highest between November and February.  The earlier commencement date helps to maximise the reduction in costs for new tenants.  The Act is not retrospective, and does not apply to any letting fees charged within a tenancy agreement entered into prior to 12 December 2018.

From the commencement date, any charging of letting fees is deemed an “unlawful act” – this includes charging any fees of the kind discussed above, by whatever name called.  Some property managers are introducing new fees to charge to landlords to cover the cost of finding tenants, such as “Tenancy Fees” or “Admin Fees”.  Landlords should be aware that these fees cannot be passed on to the tenant as they are simply letting fees with different names.  Anyone who is found to have unlawfully charged a letting fee could be liable for up to $1,000 in exemplary damages. 

This does not have any impact on the ability to charge rent in advance or a bond.  It further does not impact the landlord’s ability to recover reasonable expenses from a tenant where expenses are incurred from the tenant wishing to reassign or sublet.  Letting agents are still able to be used, however the landlord must meet the costs of this themselves instead of passing them on to the tenants.

Dale acknowledges the assistance of Kaylee Bird in preparing this article.

Dale is a Senior Associate in our Property Team and can be contacted on 07 958 7428.