What a ban on letting fees means for the rental market


Property can be a great investment, but it can also be a time consuming one. As a landlord managing your own property, you're tired of being time poor and the stress of dealing with all the demands involved. The pain of dealing with tenants, inspections, maintenance, rent arrears, confrontations, and legal rights — it never ends and it's just not what you want to be doing with your time. Damage to the property and unsuitable tenants have caused you a few sleepless nights, as well as the pressure of still covering two mortgages.

If you'd like to remove the stress of owning an investment property, having it professionally managed might be the ideal solution. You'll save you time and money while protecting your investment. 

Proposed changes to letting fees under then Residential Tenancies Act could influence the rental market, so if you're considering property management it's important to understand how these might affect you. In this blog, we explain what you need to know about the new regulations. 

Banning letting fees

Parliament's new bill states that it will be illegal for letting agents or landlords to charge a letting fee when renting a home. Currently, tenants can be required to pay a letting fee — usually a week's rent — on top of the other upfront costs of bond and rent in advance to secure a rental property. The changes aim to reduce these upfront costs for tenants.

Landlords can still use the services of a letting agent, such as a property management company, but the cost of that service will have to be met by the landlord. If the bill becomes law, anyone who charges a letting fee can be ordered to pay damages of up to $1000.


What a letting fee covers

Letting fees cover several processes of renting out a property including, inspections, advertising costs, viewings, background checks on tenants, liaising with landlords and processing the tenancy agreement. Under the new regulations, landlords or property investors who manage their own properties will still need to ensure this work is carried out, but the tenant will no longer bear the cost. 


What does this mean for the rental market?

Ultimately, landlords who employ a property manager may pass on the cost of a letting fee to tenants anyway in the form of higher rent, while others will simply bear the cost themselves. Others believe whoever gets the benefit should pay the letting fee. For example, if a landlord uses a property manager to find them a tenant, they should pay the fee. Alternatively, if tenants are struggling to find rental accommodation then they could pay the fee to increase their choice of rental properties. 

It's hoped the ban will not reduce the number of rentals on the market. The potential extra cost of letting fee services is another factor investors need to consider when buying or having their property managed. 

To make sure your investment dreams are realised, you need the latest information so you can make informed decisions. Understanding proposed changes to letting fees are one aspect of this. 

To find out more about successfully investing in property, download our ebook - How to become a property investor in any market. 

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