Tenants wanting to exit a rental early are being loaded up with high fees from property managers and landlords.
Photo: RNZ / Nate McKinnon
Renters advocates and Consumer New Zealand say it's outrageous but property managers say they're just following the rules.
A mother of two who wishes to remain anonymous wants to leave her rental because it's next to a bar and she doesn't feel safe.
The tenant expected to foot some costs for breaking the lease early.
But she was surprised when she was handed a $600 bill - $181 for advertising, $300 for administration at $66 per hour, an entry inspection fee and $75 for four tenant checks.
So she challenged it.
"I rang Tenancy Services and he told me he didn't know what an entry inspection was and she couldn't charge $66 per hour if that is not what her hourly pay rate was."
It has now been taken to the Tenancy Tribunal and is awaiting mediation.
"All I wanted from her was a better understanding of what we were paying for and a proper receipt and quotes.
"I've done my research and now I know what she is charging us for is lies, and it doesn't cost that much," she said.
Another example RNZ has seen includes $85 per hour fees for administration costs, petrol fees, tenant viewings at $85 per head, background checks per tenant, and the list goes on.
Fees can be charged for an early exit from a lease, as long as they are reasonable to cover the costs of finding a new tenant.
But Renters United's spokesperson Ashok Jacob said he is "exasperated" that property managers and landlords are unreasonably piling on the costs.
"These costs are all immediately being passed on to the tenants, and tenants don't have a choice which property manager they can go for, meaning there is no real market there.
"It seems really unfair and shows there is such a power imbalance between tenants and landlords and property managers," he said.
Jacob added that renters are already paying a lot of money to live in substandard houses, and that due to demand for rentals, they shouldn't have to foot more of the bill.
He said landlords should absorb more of the costs, as part of their business risk management.
Consumer New Zealand's head of research, Jessica Wilson, said the organisation deals with a lot of complaints over unfair exit fees, and that it's mostly property managers seeking these added costs.
"You wouldn't expect to have multiple add-ons really. We think if a property manager is trying to charge for a lot of costs, that really are just part of the normal course of their business, and not specifically related to this tenancy, they shouldn't be passing them on to the tenants."
Property managers are already compensated for their labour by the landlord, she said.
But Property Managers Institute's president David Pearse said its the new Residential Tenancy laws that are pushing up costs to tenants who want out of a contract.
"It used to be that we would charge a set fee for the actual time involved and then the TradeMe advertisement, credit checks and disbursements.
"But under the new legislation it could be a lot more and tenants have to shoulder the true cost, rather than a subsidised cost for breaking a fixed term."
He said property managers are adhering to the rules closely.
Most property managers charge out at about $50 an hour, he added.
Tenancy Services national manager Steve Watson said the examples of costs in this story are likely considered reasonable, despite the advice given to the tenant RNZ spoke to.
"Landlords are entitled to recover expenses that came up during the assignment process. So even if the tenant finds their own replacement, the landlord can still ask the tenant to pay for reasonable costs incurred."
They must provide a tenant with a break-down of those costs, he said.
The Ministry of Housing and Urban Development said a high hourly rate may be challengeable.
It said the expenses charged must reflect the actual costs and that landlords and property management companies cannot take the approach of charging a blanket fee across multiple properties as this does not reflect actual costs.
Ultimately, the bucks stop with the Tenancy Tribunal and, adding to the confusion, its adjudicators have interpreted 'reasonable costs' differently in separate cases.
Consumer NZ's Jessica Wilson said there should be more clarity around the new rules.
"It's an issue we have been concerned about for some time.
"What we would like to have seen in the recent review of the Residential Tenancy Act were some hard and fast rules about what property managers and landlords can charge in these situations.
Some of the costs being passed on to tenants is unreasonable, she said.
Consumer New Zealand urges tenants to get in touch with them or the Tenancy Tribunal if they believe the fees are too high.