Rental agents 'milking' tenants

19:32, Jul 13 2014
Christchurch tenant Selina
'TAKING FOOD OUT OF KIDS' MOUTHS': Christchurch tenant Selina was charged $450 in "letting fees" to renew her lease.

Rental agents in Christchurch's tight housing market are "milking" vulnerable tenants by charging them to renew their lease, social agencies say.

The practice has been labelled "contentious" and welfare organisations want it banned.

Selina, who did not want her last name used, had been living in her home for more than a year when the lease came up for renewal. This year, however, it came with a price tag: $450 in "letting fees".

"I couldn't believe it," Selina said.

"$450 just for signing a piece of paper? This is taking food out my kids' mouths."

Selina's rent had increased $50 in the last year.


A single mother with four children, she has a fixed income and said riding out the rent increases was "hard enough".

When the unexpected bill hit she was afraid of losing her home.

Her rental agent would not back down.

With the help of the Mayor's Welfare Fund, Selina could eventually cover the cost. However, she was already terrified of her next renewal.

"I'm worried I'm gonna be in the same boat next year," she said.

Letting fees were designed for agents to cover the cost of setting up a new tenancy.

In Christchurch, tenants simply renewing leases are being faced with bills of up to $1000.

By law, letting fees must be a fair and reasonable representation of the cost of re-leasing a home.

There is no cap on the amount charged, but common practice is one week's rent plus GST.

One rental agent, who wished to remain anonymous, said tenants should not pay renewal fees.

"There's no admin involved in renewing a tenancy except changing the date in the system," the agent said.

Tenant's Protection Agency manager Helen Gatonyi said tenants could approach the tenancy tribunal about renewal fees, but many were afraid of losing their homes if they spoke up.

The fees were "fear trumping fairness", she said, with Canterbury's stretched market forcing tenants to accept unreasonable costs.

"A week's rent plus GST, for doing what? Changing the dates on the tenancy agreement? That is unfair and unreasonable."

Gatonyi said many agents were also opting for shorter tenancies to make more from fees.

"Rents are so high right now that it's in the interests of agents to have shorter tenancies for fixed term because it generates a large income."

While year-long tenancies were once the norm, "now it's not unusual to hear of 3, 6, or 10-month tenancies. Because if you let a property for a year, you get one fee. If you let it four times a year, you get four fees".

As well as the up-front cost, Gatyoni said the policy created instability and a climate of fear for renters.

St Vincent De Paul president Richard Williamson took Selina's case to the Real Estate Institute, and said several clients had approached the agency hit by fees.

He was waiting on a decision.

For renewals, Williamson said, tenants should consider challenging the fees through the tenancy tribunal.

"Even at the most exorbitant pricing out of labour it would take about five minutes to renew a lease."

Harcourts Grenadier Property manager Patricia Bowden said the agency charged one week's rent plus GST as a letting fee.

Some Harcourts franchises did charge for rollovers, but her franchise did not, she said.

Even in the case of rollover leases, however, she believed a letting fee was still justified.

"There is a lot of work involved - even with a renewal, circumstances change. Each renewal has to be treated like a new tenancy."

Bayleys property manager Matthew Curtis said the agency charged one week's rent plus GST.

A Ministry of Business Innovation and Employment spokeswoman said the ministry was "aware that there is currently an issue in Christchurch where Property Managers are requiring a further letting fee where a new agreement . . . is being offered".

She described the practice as "contentious".

The Press