Forums / Property Investing / Help Needed! / Re-letting/New Contract fees for existing tenant

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  • Profile photo of bacchubacchu
    Participant
    @bacchu
    Join Date: 2004
    Post Count: 62

    Hey guys,
    Need some advice. My tenants have been living in my IP for a while now. Recently we had a rent increase. I was told tenants r happy for it and all went through. Now i see a “re-letting” fee of $200+ on my account. Upon some digging they tell me its a system fault and that my tenant has signed a new 12 month contract and so the new contract fee has been put on my account.

    Is that normal fee structure ? $200+ for practically drawing up a new contract and getting it signed ? Problem is i still havent got a copy of the new contract and they never asked me if i want to enter into a new contract with the tenants. Shouldnt they have asked my permission ? The tenants have been living there on a month-to-month basis for sometime now. Last time my previous tenants left before their contract expired my agent said we cannot do anything legally and that i just have to find a new tenant . So whats the point of a new contract !

    Any advise would be appreciated.

    Thanks

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    $200 is ridiculous.  It sounds like you've been charged a re-letting fee as well as a re-advertising fee.  That said, a re-letting fee can be negotiated to zero when originally recruiting your Property Manager.

    It is true that when a 12month contract expires, the tenant can stay on a "periodical lease" which means they can stay on a month-to-month sort of basis.  The difference is that they have to give you less notice if they want to leave.  It is important that 120days before the lease expires you find out if the tenant wants to re-sign, and if not, you must give them notice that they must vacate at the expiry of the lease.  Otherwise yes, it can lapse into a periodical lease if the agent doesn't bother to get them to sign a new lease.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of bacchubacchu
    Participant
    @bacchu
    Join Date: 2004
    Post Count: 62

    I am told fee is half a week’s rent + GST ……..
    thanks for the tip on negotiation of re-letting fee ..will keep that in mind for future.
    the tenants been on a month-to-month lease for a while now … so i was not bothered ..but the agents sign them up for 12 months without even asking me !

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    no a re-letting fee should not be that much.  it should be around the $55 mark.  they are charging you an amount as though they had to re-advertise, hold open for inspections, ref check tenants, and sign them up.  a re-let is simply printing a piece of paper and having the tenant sign it.  not worthy of a $200 fee.  have you referred back to the contract you signed with the agency re this?

    either way, if you did indeed sign up for such ridiculous fees, you can still now say "well do you know what?  i am literally going to fire you and hire a different agency right now unless we ammend this fee structure."  be sure you have first dug around and found an agent you would be happy with before you do this.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of bacchubacchu
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    @bacchu
    Join Date: 2004
    Post Count: 62

    Ok that sounds nice ..maybe i will fire them ….and maybe i will take up the job of doing it on my own ! Cant be too difficult can it !

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    i wouldn't try to self manage if i were you.  it's great so long as everything is perfect with the tenant, but if something goes wrong, it becomes a huge mess if you are self managing.  if nothing else, your local property manager is handy key storage for when the tenant locks themself out of the house and needs to borrow the spare set, and sort of cheap legal advice.  they are at vcat all the time seeing what the likely outcomes of vcat cases will be and can thus advise you accordingly.  they also have access to TICA, the bad tenant database, to screen prospective tenants.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    JacM wrote:
    $200 is ridiculous.

    I agree – that sounds ridiculous. If you were changing tenants than yes – but the fact that it's business as usual with your current tenants, I can't see how they can justify that cost. I would be asking questions.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Josh AthertonJosh Atherton
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    @josh-atherton
    Join Date: 2011
    Post Count: 269

    Pre-Negotiation is key here. It should always be done at the start (hiring the manager) but can be done at this stage in. I even go as far as pre negotiating that if the manager cannot get me a 12 month lease then I will not pay any subsequent let fees for a 12 month period. (that is only 1 let fee can be charged every 12 months). I then Ensure that a new let fee can only be charged upon one tenant vacating and another occupying the property no matter when that is.

    I would be going to them now and saying that you are a valued client, you can easily take your business elsewhere, that you have been offered to not be charge a let/start up fee from their competitors etc. And for the inconvenience i would be asking for some reduction in management fees (may be hard if you have only 1 property with them). It might also be worth calling a competitor and asking what they will offer you to take the management over. ie rates etc.

    Oh and on a final note….Do NOT self manage! A good agent is worth their weight in gold, its just a matter of finding one.

    Happy investing :)

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    Bacchu,

    You should dig out a copy of the contract you entered with the agent and see if this fee is listed and if authorised. If not then you can object to it. Maybe tell them of your intention to move elsewhere and they may change their minds.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of bacchubacchu
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    @bacchu
    Join Date: 2004
    Post Count: 62

    OK i finally found the agreement and it says 'lease renewal' is '1/2 weeks rent' ………………so technically they r right but its hard to digest :( now i have signed up long time ago so not in a position to change it i think.
    also cant fire them since now they have signed the tenants to a 12 month lease and apparently the agreement says i have to pay them 5% rent till the end of the lease !

    Profile photo of Josh AthertonJosh Atherton
    Member
    @josh-atherton
    Join Date: 2011
    Post Count: 269

    wow you got yourself into a bad one here!

    Profile photo of colinnewlandcolinnewland
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    @colinnewland
    Join Date: 2006
    Post Count: 128

    The re-letting fee should be no more than $15; any more and they are ripping you off. They have completed no additional work for wich you are already paying them 8-10% management fee of which re-letting is a normal part of their duties.
    You should also see your origional contract for said fee.
    Give them a choice, refund the fee or find a new client ie: sack them ASAP.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    here is an example of roughly what you ought to negotiate next time you get the chance:

    7% of rent inclusive of gst, or thereabouts
    One week's rent to sign a new tenant
    $55 re-letting fee (resigning existing tenant) inclusive of gst
    DO NOT pay an agent by the hour, nor at all, to attend VCAT hearings.  If you agree to pay such things there is absolutely no incentive for them to get a good tenant for you and take care of the property properly along the way.
    There will normally be a statement fee of $2 a month or thereabouts.
    You should expect an agent to inspect each of your properties twice a year, and you should insist on seeing a written report and photos which clearly show the state of the property.  It is not acceptable for the property manager to send the agency secretary to perform inspections – it needs to be the Property Manager who is trained to know what issues to look out for.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of bacchubacchu
    Participant
    @bacchu
    Join Date: 2004
    Post Count: 62

    Thanks for all those tips..unfortunately firing them now is not in my best interests since because they have singed a new 12 months lease with the tenant according to agreement i will have to pay them 5% of the rent till the lease expires if i fire them.

    Profile photo of colinnewlandcolinnewland
    Participant
    @colinnewland
    Join Date: 2006
    Post Count: 128

    The new lease an dthe rental management agreement are two different contracts. Just because they have re-signed a current tenant does NOT extend their management contract, they stand apart.
    Do not let them con you into thinking otherwise.
    Most management contracts also try and bind you to fees for the remainder of their management contract even if you had to fire them for cause (failing to carry out lawful instructions, no inspections etc etc). At the very least STRIKE OUT this clasue in EVERY management contract. If they object, find a new agent as these are not the agents for you.

    Profile photo of lifestylezlifestylez
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    @lifestylez
    Join Date: 2011
    Post Count: 61

    Yeah this happened to me as well, I had a property years ago and I never got charged a "re-let" fee by my agent Ray White.  However, with my second property, the management was by an on-site manager and when he first charged me a re-let fee of 1/2 week rent I was surprised and I questioned him about it.

    When I went back to my written agreement, sure enough this fee was listed, so I either did not read the agreement properly at the time or did not understand the full implications of this fee.

    When you think about it, if your tenant keeps renewing 6 month leases, you are losing a full week's rent every year due to this fee.

    In future, I will definately be checking my agreements with property managers and making sure I don't have to pay this fee (or at least pay alot less for it).

    Darren.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Its actually amazing how many people sign agreements without reading them at all.

    So from an agent's perspective it is worth a punt by putting in all sorts of extra charges which they would just remove if asked.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of SezSez
    Member
    @sez
    Join Date: 2011
    Post Count: 26

    Check the agreement for a clause about your agent not carrying out their job correctly. Firstly – You have not agreed to a new 12 month lease, therefore, they should not hold you to 5% if you terminate the agreement, also, contact Consumer Affairs (or your state equivilant if you're not in VIC) as there are strict regulations on what agents can and can not put in a managing agreement. According to what you have told us the agent has been negligent in their duties and so you should be able to exit the agreement free of penalty.

    Also, if your tenants were in a fixed term agreement when they left that is a break lease, that tenant should have paid rent until a new tenant was found, advertising fees and a pro-rata letting fee. From the information you have provided your property manager is not worth the space they occupy and give the rest of us a bad name!

    Just for the record, $200 is excessive !!

    Don't self manage, find yourself another local agent who will do their job properly, you'll find the better service is probably cheaper than what you are currently paying!!

    Profile photo of nurse1nurse1
    Member
    @nurse1
    Join Date: 2010
    Post Count: 21

    Tenant of  unit is leaving next month not renewing the lease We have been sent a letter saying a letting fee of $275 will be charged and it is optional if we have advertising , photo on board etc (additional costs)

    They wont be advertising until another week 

    Should we look around for another property manager? This agent has always been a bit slack like not informing us a couple of times that rent wasn't paid and we didn't know until the money wasn't in our account when due and not completing a 6 month inspection

    Also we had a split system put in the unit in July how dos that work as its not on the condition report that was done at start of lease in April The 6 month  inspection that turned out to be 9 months did not include an updated the condition report.

    Also when tenant leaves can we deduct from the bond money if

    The garden has not been weeded to original state

    remote lost for split system?

    Profile photo of PEACHYPEACHY
    Member
    @peachy
    Join Date: 2004
    Post Count: 78

    Yes, negotiating the contract details before signing is so important. 

    We don't pay re-letting fees at all if the same tenant stays on. They have competition from other agencies so they always agree to this. Also cross out any notice period and reduce it to 30 days or less.

    Nurse 1 definitely look for another manager provided you are able to get out of this contract. If they are slack then they don't deserve your money. 

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