There are fears property managers have found a loophole in the new ban on letting fees after a man was charged for transferring his rental into his niece's name.

The Government last month banned the charging of letting fees to new renters, arguing property managers should instead recover their costs from landlords.

However, when former West Auckland tenant Ben recently left his Glendene rental and sought to have his niece take over the tenancy, he was hit with a $250 fee.

Ben - who did not want his surname published - suspected the charge was a letting fee in disguise for his niece's new tenancy.


The Ministry of Business, Innovation and Employment has confirmed his property managers were within their rights to charge him.

This was because - rather than being a new tenancy where a letting fee would not have been permitted - Ben's case was considered a variation of his existing tenancy contract and, as such, his property managers were allowed to charge him for the costs of their services.

Despite MBIE's stance, Tenants Protection Association chair Anthony Rimmell is "extremely disappointed", saying it seemed like a loophole to circumvent the letting fee ban.

"It might be legal but it is against the spirit of the ban," he said.

"It flies in the face of what was intended."

Property managers had previously been allowed to charge new renters letting fees as a way to recover the costs involved in looking for tenants on behalf of landlords.

But the Government banned letting fees last month as part of a raft of new measures designed to strengthen the rights of renters and keep costs down at a time when home ownership is out of the reach of many.

Ben's was the first instance of the fee being charged that both Rimmell and fellow lobbyist Robert Whitaker from Renters United had heard of, but they worried there would be more.


Whitaker said Wellington was in the middle of the busy New Year period when many new tenancies started up.

"We'll be out there asking tenants to report cases where they are being asked to pay a fee of any kind," he said.

"We can check that the new law is being applied properly by property managers, and they are not trying to sneak in by the back door by calling the letting fee something else."

Rimmell said he would also seek to speak to Housing Minister Phil Twyford about the situation.

Helena Waldron, a business development manager with Ben's property managers, Impression Real Estate, said they eventually agreed to drop the $250 charge after Ben complained.

But she said the fee was standard at her company because "technically it was a change in (Ben's) agreement".

She said Impression Real Estate would have to make a new rental agreement, access new bond payments and do a credit check on Ben's niece, all of which would have cost the company money.

They advised Ben, he could let his tenancy end and then have his niece reapply for the rental.

This would mean she would have to reapply alongside others after the rental had been advertised, but she said there would be no fee charged and they would have put in a reference on her behalf with the landlord.

David Faulkner from property management consultants Real-iQ and Andrew King from the NZ Property Investors Federation backed Impression Real Estate.

They said the Tenancies Act allowed property managers to charge tenants when their requests caused costs to their business.

But Renters United's Whitaker worried that while property managers were allowed to charge "reasonable" fees for their services, it was hard to enforce because the only way to do so was to have tenants complain to the Tenancy Tribunal.

"No tenant is likely to want to take their landlord to the tribunal over $250 so even it is unfair they will probably bite the bullet and pay it," he said.

"This is a problem with lots of the tenancy laws is that it is up to the tenant to enforce it themselves and that puts them at a big disadvantage."