On Wednesday the 31st of October, Parliament officially passed the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill. Officially outlawing the practice of letting fees in New Zealand. While the Act doesn’t come into force until the 12th of December and any tenancies signed before this date will not be affected. It is our duty as property managers however to inform you how we will be changing the way we process new tenancies in the future.
Due to this Quinovic Te Aro is investigating the best possible way to process new tenancies. It is likely that we will be introducing a New Tenancy Fee of $550 (plus GST) that the legislation requires must be charged to the property owner to meet this challenge. While this may seem like an exuberant amount at a glance please allow us to put it in context. If the average tenancy is 24 months in duration, the total increased cost is $316.25 per year after GST. For this cost to be fully recovered rents will need to increase by just over $6 per week. It is important to note that this cost is per tenancy, not per tenant.
You may be wondering why this fee is set at the point it is. As such it is important to note that Quinovic Te Aro does not make a profit on new tenancies. The cost of our property managers time and fees to conduct a reference check and credit check is over $500 per tenancy. Then there are the costs of advertising your property on Trade Me and other website, conducting viewing, fuel costs, chattel photos and reporting, and more! All this makes the cost to Quinovic Te Aro to process a tenancy almost $1500, than $550. Almost 2.66 times the New Tenancy Fee that we charge to you. The reason for this is that we know that being a property owner isn’t easy. We are committed to keeping costs as low as possible, so you can have peace of mind that you are getting a great deal and that your property is in the best hands.
This separates Quinovic Te Aro from so many other property management companies. One of the leading drivers of the Government’s ban of letting fees was the fact that too many landlords were charging a letting fee of one weeks rent. To us this has never made sense considering the cost of conducting a tenancy doesn’t fluctuate much from property to property. That is why we charge a set fee for new tenancies. This allows you to be sure you’re not getting ripped off if you have a high value property and economic certainty when budgeting for the costs of your investment.
The good news for you is that the market is already reacting to this change in legislation with rent increases slightly larger than normal. We believe that these rent increases will more than cover the cost of the New Tenancy Fee. As a result, you can expect the impact of this change on you to be net zero. As the market is compensating for this additional fee on landlords. Not only that but this fee is likely to be a tax-deductible expense! Absolving most of the cost.
Despite all of this we know that the rental market is uncertain. That is why Quinovic Te Aro always has an open door for any property owner who wants to come and discuss their investment. We are ourselves a team of property owners, investors and developers. So we understand the pressures that property investors are going through at the moment. Pop into our office on Tory Street, have a coffee and we’ll outline what these changes mean for your property going forward.