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Letting fee

Discussion in 'Property Management' started by Elives, 2nd Jul, 2016.

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  1. Elives

    Elives Well-Known Member

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    Hi all,

    is it normal if you have a property which already has a tenant in there on a fixed lease and you change management to be charged a letting fee which is equal to a weeks rent + GST?

    i always thought letting fee was a fee charged when a agent found a tenant for the property

    Cheers, Elives
     
  2. MyPropertyPro

    MyPropertyPro SE Qld Property Management & Investor Services Business Member

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    No, definitely not normal. It obviously depends on what you have negotiated with your new management but I've never heard of a new manager essentially charging a landlord to obtain their business. Even if someone did, one weeks' rent + GST is incredibly expensive and a big cut into your overall return.

    A letting fee - which is usually one to two weeks' rent + GST - should only be charged for new let i.e. new tenants. At MyPropertyPro we don't believe in re-let/re-lease fees for the same tenant but I have seen PMs charge anything from half a weeks' rent to one weeks' rent just to have a new lease signed with the same tenant.
     
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  3. Elives

    Elives Well-Known Member

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    yea i think it must be a mistake i can't get in contact with them atm being Saturday but i've sent an email and will follow up on Monday. i thought it was extreme..

    Cheers, Elives
     
  4. D.T.

    D.T. Adelaide Property Manager Business Member

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    Let us know how you go. Might have been just a typo in the software ?
     
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  5. Xenia

    Xenia Adelaide Property Manager Business Member

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    No it's not normal, how can an agency justify charging a letting fee for a tenant they have not found.
     
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  6. wylie

    wylie Moderator Staff Member

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    If some agencies charge a week's rental to sign the same tenant up for another year (and I believe some agencies do charge this), then I reckon some agencies might also have the cheek to change for taking over a new property. After all, the paperwork involved in signing the same tenant (which is minimal) wouldn't be more than the complete setting up for a new property, would it?
     
  7. MyPropertyPro

    MyPropertyPro SE Qld Property Management & Investor Services Business Member

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    It somewhat depends on the job the previous PM has done. The basics are really just data entry and some organisational emails, however usually we'll pick up a bunch of maintenance items and/or other issues in one go that the previous PM has neglected to either fix or communicate with the landlord on (not usually a surprise as they're changing management for a reason). This can be a reasonable initial workload but it's new business and it's all part of the process. Charging a week's rent for that is incredibly cheeky if it's not a mistake!
     
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  8. wylie

    wylie Moderator Staff Member

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    Good point @MyPropetyPro. I've always self managed, but for the past six or so years we've been happy to pay a week's rent + GST for an agent to find us a tenant on a "let only" basis. That was partly because getting it on re.com was difficult (almost impossible really) until then, but mostly because we had three houses empty the week my mother passed away and I wasn't up to it with a funeral to arrange and just exhausted with everything else that we'd been through. Finding tenants seemed so surreal with what we were going through and we happily handed them over.

    The last time one of these houses was empty, I paid an agent, and sat nearby just to see the volume of applicants that went through in the 15 minute timeslot. I was incredulous when the agent turned up 8 minutes late, went upstairs, back downstairs two minutes later and left. I think perhaps he used the facilities. Nobody came through, but that isn't the point. I knew I had to do something so I put the house on Gumtree, found the tenant, passed her to the agent for checks (he may have been happy to screw me over and not bother opening the house, but I wasn't going to do that back to him), and paid him one week + GST for filling in the forms. (I may even have done the forms for that house, having met the tenant initially, can't remember.) That tenant is still there nearly six years later. She sought out Gumtree due to not wanting to deal with PMs any more.

    Since then, I have found tenants myself with the DIY re.com sites and still have used agents, depending on what the market is doing, how busy I am etc.

    I do recall one agency happy to charge me a week's rent + GST and then suggesting I might like to do the forms. I'm thinking, no thanks, that's what the $550 + GST is for. I'm paying advertising fees either way, so if I do the forms, they are being paid good coin just to field enquiries and do a TICA check and take in the form filled in the the tenant.

    Anyway, my question is your thoughts on agencies taking two weeks' rent + GST to do the initial checks, forms, meter reading etc. That is a bit chunk.

    And when I sign the same tenant to another term, that is not a big job either. But some agencies apparently take another week's rent + GST. It is just a new lease. And I'm guessing that most agencies would have the tenant call to the office to sign? No inspections, no checks, no leaving the office. I know when people pay cash, the tenant brings in the cash. The agent doesn't go and collect it.

    Perhaps having never paid for a PM (other than "let only" as above), I'm more aware of this when I have to put my hand in my pocket to pay for these things, especially when I've been asked to actually do the entry condition report and lease myself :eek:.

    I'm imaging a small boutique agency (run from home) would mean someone could provide similar service for a lower fee due to not having to kowtow to a franchise with all the costs involved with that, and high street rent.
     
  9. DiligentPM

    DiligentPM Well-Known Member Business Member

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    It is not normal practice to charge a week's rent plus GST with a tenant in place when changing PM agencies.

    The reason this fee is charged is to source new tenants and cover off on marketing campaign costs (signage, advertising) and agent time to undertake Open Home inspections (we offer half hour inspections to give tenants maximum window of opportunity to inspect a property and our agents capacity to commence conversational screening processes with applicants). Likewise, to offer inspections by private appointment when required, undertaking an Entry Condition report with images, working with owners to get the property 'ready for market (may include responding to maintenance matters). Importantly, the fee covers off on undertaking screening processes for shorlisted applicants (TICA checks), employment checks, reference checks from previous property managers and subsequently collecting of funds and transfer of BOND to RTA with settling tenants into the property.

    For existing tenants who choose to renew a lease, we do not charge lease renewal fees
     
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  10. Elives

    Elives Well-Known Member

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    update guys yes it was a mistake the property manager has said she will refund me the fee! i thought it had to be a mistake! good news though :D
     
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  11. wylie

    wylie Moderator Staff Member

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    Good news ;).
     
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  12. fullylucky

    fullylucky Well-Known Member

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    I agree with DT, they probably forgot to click Free letting / no letting fee charged in the software.