That's a fair question, and very pertinent to the current media focus on rentals and tenants.
It's common practice in property management to charge tenants for things like a change of tenant fee, and different companies do it in different ways. A Change of Tenant fee is charged for several reasons.
The most important reason is the need to maintain the Tenancy Agreement with full details of each tenant so that your property is protected under the Residential Tenancies Act, particularly under a Fixed Term Tenancy. An example is when a group of tenants move into a property, and over time each of the named people on the Tenancy Agreement move out and arrange for a friend to move in and replace them in continuing to pay the rent. The problem with this is that there has been no changeover inspection, and the new tenant is not named on the Tenancy Agreement, or a signatory on the bond form. You can understand the problems that can mean when the tenancy ends.
Many tenants believe that changing the names on a Tenancy Agreement is simply erasing one name and inserting another. Would that it was so uncomplicated! Here are the things that need to be done when a tenant requests to change a name on their Tenancy Agreement:
1. Contact the Owner to find out if they will allow this. Many owners can be uncomfortable with such a changeover
2. Get the new tenant to make a formal application to become a tenant so that all their details and permissions are recorded
3. Complete the new tenant's application by doing full background checks and a credit check before accepting them
4. Meet with the outgoing tenant and the incoming new tenant to progress the paperwork. It's vital to know the date that the new tenant takes over when the old tenant leaves, with no gaps as the Owner could then be disadvantaged with missed rent
5. If there are other tenants involved, they all need to give their consent to the tenant details changing on the Tenancy Agreement, and sign off on the change
6. The outgoing tenant has to complete and sign a Change of Tenant Form for the bond which is already lodged with Tenancy Services. The incoming tenant also has to sign this form, and it has to be lodged with Tenancy Services
7. The outgoing tenant will want their portion of the bond refunded to them. Since Tenancy Services, who hold the bond, do not pay out part of a bond, it's important to ensure that the incoming tenant will settle their part of the bond with the outgoing tenant
8. In some cases the incoming tenant may have to sign a whole new Tenancy Agreement, rather than just change the name on the old Agreement
9. Before agreeing to release the outgoing tenant from the Agreement and the Bond, a property inspection that is not the regularly scheduled inspection will have to be completed
10. Get all keys, garage door openers and swipe cards returned by the outgoing tenant so that they can then be provided to the new tenant
Frequently a charge to a tenant such as this is seen as blatant racketeering, and money for jam. In fact, it's a whole heap of extra work and time and communication and legwork that diverts property managers from doing the core business of maintaining the integrity of a tenancy on behalf of Client Owners. Once you take into account the time such a change involves, and the number of processes involved, the fee charged is simply a mitigation, not an added income stream that has no justification.
managemyproperty is an independent Property Management company based in Wellington, New Zealand.
Richard Horne remains a tireless and energetic investor and commentator, running an experienced eye over the property market. Visit the website at managemyproperty.co.nz
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