An article in Stuff on 14 August 2018 had the headline “What do property managers do?” It was quite a damming article about property managers and claimed with regard to letting fees that, “they are essentially money for nothing; the tenant gets nothing from paying a letting fee….the tenant is paying for a service the landlord benefits from.” This is not entirely true – there is a benefit to both landlords and tenants: tenant gets a place to live, the landlord gets a tenant.

As of 12 December 2018, landlords and property managers may no longer charge letting fees. But this does create an issue as there is a significant administration cost involved in finding new tenants in:
• advertising costs
• time taken to show a property – this may involve multiple trips to the property
• carrying out credit checks on prospective tenants
• carrying out referee checks on prospective tenants
• signing up and the induction of new tenants.

Most property management companies have stated that they intend to pass the costs on to landlords by a variety of means: either a set Tenancy fee’ (that will be higher than the one week’s rent currently charged for many rental properties), an additional monthly administration fee (that will be charged irrespective of whether the tenancy changes or not), increasing the rent (which will spread the cost to tenants but longer term tenants will end up paying more), or passing the one week’s rent charge on to the landlord by holding the first week’s rental payment. The costs that are charged to landlords will undoubtedly be passed on to the tenants, if not immediately then certainly over time. So, despite the good intention of the change to the legislation for renters, the longer-term consequence to tenants is going to be higher rental costs.

At Nightingales we have not yet decided which is the best way to recoup the money. However, it is not our intention to immediately rush into any of the methods being adopted by other property management companies. We will keep you informed – watch this space!