Lease Renewal fee?

well, I guess this a bit of a rant,

today I got my lease renewal option letter, property is in south of brisbane. called the agent to confirm the fees for the resigning of the lease, got told it was zero,. I almost fell off my chair with joy. Had to triple confirm, they dont charge a lease fee or lease prep fee.

I have a property in elizabeth and there fees are 2 weeks rent for a new signing, 1 WEEKS RENT FOR A RELEASE,

absolutely ludicrous, ive asked the agents the jusitfication of these fees and everytime its a BS answer, like " oh we have rent to pay",yeah, so the other agents get free rent!

im so surprised that someone hasnt come in and just saturated the market with competition,

and for the record, both rents are the same

does my head in

 

Recently purchased a place, existing pm wanted 1.1% to begin with, then crunched to 88p.a.

When I questioned why I have to pay for something which is business as usual, I was told it costs money to do. Pfft, print out a few pages and get them to sign whilst doing a routine inspection, spare me.

Just sent off an email a couple of days ago to the now ex agent.

'The tenant who has been there 7 years, said that the only way he will be leaving the property is in a body bag. If he has another 20 years left in him, your company has lost about 21k, to try and make 1.6k - great business decision.'

The new agent couldn't believe his luck!!

 

The fees would be as per the agency appointment you have signed with the agent. Why are you complaining about them now? Also, you often get what you pay for. If you are concerned about paying a renewal fee don't complain when your low cost provider doesn't respond or attend to maintenance issues in a timely fashion.

 

See the above post JDM, most companies that try to charge 1 weeks rent fee to renew a lease do that to make a quick buck from investors that don't know what it involves.

It's not about getting what you pay for in this instance because they really can't justify charging 1 weeks rent to renew a lease when questioned about it.

If you think it is justified then they would be consistent and at least charge 10x that amount for a new tenancy. But they don't because that would be outrageous right.

 

Can you afford not to pay it? Ie just let them roll over onto periodic tenancy on the same rent, lose stability of income, lose insurance cover in some cases and have a notice period of 21 days for them / 90 days for you. Not an ideal scenario.

There should absolutely be a renewal fee. Starting from about 80 days out from end of lease, need to obtain intentions from both investor (keeping, selling, renovating, demolishing) and tenant (staying, moving, depends on price change) as rent increase needs 60 days notice and requires a review of market conditions. A renewal notice to the tenant has a 28 day notice period, which requires constant chasing to get it signed and returned. Otherwise a 28 day termination notice needs to go out, which has similar notice period applicable and prevents the periodic scenario described above. It can be a bit like herding cats, but 1 day late at landlords end and he ends up with a periodic scenario described above.

As you can see, leasing and renewing is where majority of the work occurs, so makes sense to structure fees accordingly.

If you have a PM that knows what they're doing, its worth it.

 

Don't entirely agree with this D.T., given that PMs get their % of weekly rent every week, wouldn't that cover for all the work that you mentioned in this post?

 

You could add up other agencies fees over the course of the year and it'd probably end up to be a similar total. All I'm saying is, the fee structure should line up to be when most of the work occurs.

Then again, if you're choosing agency based on fees, it's a bit like choosing a mortgage broker based on interest rate. Probably not looking at / for the right things if you want to go far in the investing game.

 

@D.T under your thoughts tho, when the lease has started, money is coming in without an issue, pm is doing no work, does that mean that we shouldn't have to pay any fee at all? (Or a minimal fee for the cash handling?)

Paying a resigning fee is like an agent telling you, 'yes, it's x% to sell your property, $x for the advertising, but now that you actually want me to sign the contract, that will cost you more'

All of the agents I use, provide a great service with the rate rolled in. When they don't do any work, I don't ask for a discount - so when they have to do a little bit of work, I expect that they will do that for me. Swings and roundabouts.

I don't really agree with the assertion that you are making which is, if you pay more you get a better service. Sometimes that is the case, other times you are just getting taken for a ride.

 

im not actually complaining about the actual amounts, im complaining about the BS justifications and the fact that its ridiculous. ive had cheap agents do good and bad jobs and expensive agents do just as good and bad

 

yes, for these agents I just let it roll onto periodic, and they wonder why I do that,

as for renewal fees, no offence your reply does sound like from a person who charges higher then other agents or states (I dont know your fees btw) all of the stuff you mentioned also applies to every other state and agent, pretty much all of my other properties have a lease prep fee of $30 -$50 which is fair enough, but 1 weeks is ludicrous. Thats part of your ongoing management fees, thats like complaining that an agent has to do periodic inspections which is extra work!

 

if that was the case then the fee structure would be somehting like this

6% management fee for the first 1 month
5% mangeement fee for 2nd-10th month (assuming 12 month lease)
6% management fee for 11-12th months

as you mention about going far inthe investing game, fees comprise of one of many factors in investing, im sure I could get the best property manager on earth if I offered 25% fees, in which case the agent will be camping outside the property in case of a problem. the reality is you have to shop around, for the best deal and for the record I dont think with PMs, what you pay is what you get.


Like I said im happy to accept and encourage the agents in SA, the area im talking about to justify 8.8-10% in fees with 2weeks lease fee and 1 week renewal fee!! been asking for years and not one remotely valid excuse..... always the "oh we have staff wages to pay" type excuses

as far as I am aware there is absolutely ZERO costs that would be higher then an agent charging 5% in sydney, in fact, their costs would be lower for the most part

 

The beauty of a free market with supply and demand in operation. Perhaps you've just identified a good business venture?

 

Tooooooo right!!!!

 

Completely disagree with charging lease renewal fees. As an agent in Brisbane we do not charge a lease renewal fee as we are firm believers that this service is included in the weekly management fee and is simply part of managing the property for the Investor. I do not see that there is a great deal of more work involved at all to justify this charge - on the contrary there is considerably less work involved - there are no applications to process, no leasing and no entry condition report to be conducted as this obviously has already been attended to prior to tenants moving in.

Yes there are often a few emails back and forth, a new lease to be drawn up and creating a current rental appraisal to ascertain if a rent increase is warranted, however generally this really doesn't take long and certainly I feel, this is simply part of managing the property and is a service included in the weekly management fee. I have previously worked for places that do charge anything from a flat fee of $100 up to 1/2 a weeks rent or more for renewing a lease and this never sat well with me or many of the landlords at the time.

 

I don't like periodical tenancies for two key reasons:

• The landlord still has all the same obligations of notice periods to evict, but the tenant enjoys far less (28 days in VIC)
• Most insurers will cover you for far less weeks rent (eg 2) on a periodical tenancy that is in default, compared to far more weeks (eg 16+) if on fixed term lease.

As such I always have my tenants renew their leases.

 

look the reality is that Iunderstand when an agent says oh resigning a lease is more then them coming in, signing a piece of paper and going on their merry way

you need to talk to them, sit them down, prepare the paperwork, send out the letters, liase with teannts and landlords, im not saying it should be free, a lease prep fee is fine, however 1 weeks rent, you have gotta be kidding me, if other agents dont charge it, unless there is a valid reason to charge it, then there is no justification for charging it except for gouging

 

It's cool TMNT there's an agency for everyone

 

I've dealt with various different PMs, some good, some great, some less than competent. Some charge renewal fees, some do not.

Of the PMs that charged a renewal fee, they fell into two categories: they charged a flat fee, or they charged 1 week's rent (or more).

For the PMs that charge 1 week's rent (or more) per renewal, here is my issue. If I have a property close to the CBD, rented at $520 pw and I also have a property in a lower socio-economic suburb rented at $170 pw, how does one justify charging $520 to renew one lease and only $170 to renew the other? All things being equal, the 'extra' work for the PM would be the same for both properties.

I understand that PMs do have extra time costs in preparing a lease renewal and getting it signed. Some PMs consider that to be part of their weekly management fee and do not charge for renewals. Others choose to be compensated for the work and do charge a renewal. However, how is it right or good business ethics to charge over 300% (!) more to renew the $520 pw lease than the other? As stated above, the amount of work for both properties is equal.

I am yet to find a PM who can offer a reasonable and fair explanation to my mind as to how this is justifiable.

No renewal fee? = yes.
A flat rate renewal fee? = maybe, yes.
1 week or more rent = sorry, no.

As always, Your Mileage May Vary.

 

Comes down to overall revenue at end of the day, some charge for monthly admin and for routine inspections. Some pass on their advertising costs or get kick backs on maintenance or insurance.

Different states also have different trends in what percentages they charge and what add-ons they add on. Perth is quite prolific for this.

Each has their own business model. Each can probably work. I'm not the cheapest going around, but far from most expensive too. My clients made a service based decision rather than a fee based decision.

You can't go to Kmart and get the same products as David Jones.

 

Agreed @D.T. Kmart's product are a lot more on trend than DJs these days!!