rental property application

Unexpected Costs When Applying for a Rental Home

When looking for a rental property you are up against numerous other property hunters. It can be difficult to find a rental home that fits within your budget and lifestyle needs. Stuff Property released an article saying that some property managers are now charging a voluntary application fee, offering you a better chance of securing the home.

With this in mind, Shopless has investigated the potential and unexpected costs that could accompany your rental application. As well as what tenancy or rental fees are NOT allowed under current New Zealand law. 

Potential Unexpected Costs

‘Voluntary’ Tenancy Application Fee

For good reason this is a controversial move by some rental companies in recent years. Tenancy agencies could ask for a voluntary tenancy application fee, the idea of this being that you would pay them to ensure you are a documented and screened applicant in their system. These fees could range between $20 – $40, and are applied by the tenancy tracking technology used by the companies.

For a one-off charge this seems like a justifiable expense. However the problem arises when applicants have to go through this multiple times, with different tenancy agencies. In a high demand market every application could impact your savings and ability to rent a home. Additionally for tenants choosing to opt out of the voluntary fee, their application may be disregarded or considered less of a priority. 

It is important to note that these application fees cannot be charged by individual landlords. This would be considered a violation of the ‘key money’ clause. As these tenancy agencies use pre-programmed application technology, this technology is a separate entity and therefore not involved with the tenancy agreement. It is also important to note that the fee is valid for 90 days from the payment to an individual tenancy agency. After this time frame you would have to go through the process and payment again if applying for more homes. 

Reference Checks

These are very similar to the last point stipulated. However instead of being implemented by the technology, reference checks can on occasion be enforced by the rental agency. Some agencies could enforce both fees if they chose to. A reference check fee would accompany your confirmed tenancy with the bond and prepaid rent. Or it could be charged to current tenants looking to replace a member of their flat. A previous article suggested that these fees enforced by some rental agencies could be a way of replacing letting fees. With one tenant identified as receiving a reference check fee priced at $287.50, for replacing an existing tenant. 

Reference checks are intended to reflect the amount of time spent doing paperwork. For example, contacting references, liaising with the bond agency and any additional paperwork required by the rental company. If you feel you have been overcharged for this fee and have not received an explanation from your tenancy managers. It is important to contact the Tenancy Compliance and Investigations Team about such an issue, here.

Unexpected Costs That Are Not Allowed

Letting Fees 

In November 2018 letting agents and landlords were no longer able to charge a letting fee for tenants. Previously these surcharges were the cost of one weeks rent. They were intended to cover the cost of the property manager finding a tenant for the property. Regardless of the length of time it took to find a new tenant both property managers and landlords would charge the same price to renters. Additionally property managers are now not allowed to charge a fee or bond specifically for ‘key money’. 

Property Managers can however claim this payment back in other ways. They can either increase the management fees – which would equate to higher rent or lesser income for the landlord. Or they can charge landlords the fee that was previously charged to tenants. Although the letting fee is no longer a burden for tenants, in some cases the cost has been transferred elsewhere. 

Bidding Wars

A landlord or property manager cannot invoke or icite bidding wars. The rent that has been advertised by the property manager must be the rent applied on acceptance of the tenancy. If an agent or owner offers you a higher rental price to secure the tenancy. Or they request your best price based on multiple expressions of interest, this would be considered creating a bidding war and is not legal. If you feel pressured into negotiating a higher rent than is advertised, make sure that this is reported to tenancy services. 

Please note that rent increases are not seen as bidding wars. If you have been in a rental for at least one year, the landlord can increase rent to meet market standards. However they would be required to give at least 60 days notice of the rental increase.

These are just a few unexpected costs that you may come across when applying for a rental home. The most important thing when going through the application process is to know your rights. If you encounter unexpected fees when making a rental application take a look at the tenancy services website. It is important you know what is and isn’t legal, so that your experience signing a rental is a positive one.

If you are looking for a rental property or looking to board, make sure to check out the current rental properties available on Shopless, listed here.

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