Letting fees are another expense tenants may need to pay if they use a letting agent.
Sometimes a letting fee is charged by a letting agent or solicitor to grant or assign a tenancy.
Letting fees are currently allowed under tenancy law (Residential Tenancies Act) but only letting agents or a landlord’s solicitor are allowed to charge this fee. The requirement to pay a letting fee must be written into the tenancy agreement.
NOTE: The Residential Tenancies Act now prohibits letting fees from being charged to tenants. This change takes effect on Monday 12 December.
If you sign a tenancy agreement before 12 December 2018, you may still need to pay a letting fee. This is the case even if the tenancy begins after 12 December.
Who can be a letting agent
A letting agent is someone who has the authority to act as the landlord’s agent when granting or assigning a tenancy. They usually will continue to act as the landlord during the tenancy, but in some cases they may only carry out the task of signing a tenant up and then the landlord will take over once the tenancy starts.
A letting agent is a person who makes a living from renting or managing properties. They are usually a person who works for a property management company.
Some examples of people who aren’t usually letting agents are:
- private landlords renting out their own properties
- a person who is part of a trust (a trustee or beneficiary of a trust)
- a person who is the director of a company that owns a rental property.
What is a letting fee for
A letting fee covers the cost of putting a tenancy in place. It covers the cost for time involved by the letting agent for things like:
- holding open homes
- reviewing applications from prospective tenants
- preparing tenancy agreements and conducting the initial property inspection
Letting fees can vary, but are normally one week’s rent plus GST.
The tenancy agreement must state whether there is a letting fee. If the tenant signs or agrees to the tenancy, they must pay the letting fee.
A letting fee cannot be charged to renew or extend a tenancy.
Read the Residential Tenancies Act(external link) on the New Zealand Legislation website.
‘Key money’ is money (other than rent and bond) a landlord asks the tenant to pay for granting, or making changes to a tenancy.
Landlords are not allowed to charge key money under tenancy law. A couple of important exceptions are:
- letting fees (see above)
- money tenants give to the landlord to hold the property while they decide whether or not to rent it (tenancy law calls this an ‘option to enter into a tenancy agreement’ or an ‘option fee’).
The maximum amount of money a tenant can be charged under an ‘option’ is 1 week’s rent. If they decide to rent the property, the money must be refunded or put towards rent.