Tenants unaware they’ll be charged $575 to break lease.
Property management companies Oxygen and Quinovic are charging tenants fees of $495 to $575 to end fixed-term tenancies. But the fees aren’t disclosed in rental agreements and may be open to challenge under the unfair terms provisions of the Fair Trading Act.
Fixed-term contracts are favoured by property managers and are typically offered on a take-it or leave-it basis. If a tenant wants to end the contract early, they have to get the landlord’s agreement.
However, Quinovic also requires tenants to pay a $575 break fee to end the tenancy. Quinovic won’t re-advertise the property for rent until the fee is paid.
Oxygen, an offshoot of real estate firm Professionals, requires tenants to pay a $264.50 break fee plus a $230 marketing fee. Like Quinovic, it won’t market the property until the fees are paid.
Neither company discloses these conditions when the tenant signs their contract. Tenants we’ve received complaints from only found out about the fees when they asked to end the tenancy.
Since March, the Fair Trading Act has banned unfair terms in standard form consumer contracts. Terms that lock-in consumers to contracts they want to exit or penalise them for ending a contract early are among those which may be regarded as unfair.
Terms that aren’t transparent are more likely to be considered unfair. The Commerce Commission, which enforces the Act, has stated price is often a critical factor for consumers when entering into a contract and it “will be concerned about all price terms that have not been transparently disclosed”.
While property managers may be able to charge a break fee when a fixed-term contract is ended early, any fee must be limited to the reasonable costs incurred by the company.
Tenants are entitled to ask for a breakdown of the property manager’s charges and can apply to the Tenancy Tribunal for a determination of the costs they’re required to pay. No fees can be charged to end a periodic tenancy: tenants can end the contract by giving 21 days’ notice.
Quinovic regards its fee as “fair and reasonable” and believes the Fair Trading Act doesn’t apply to an agreement to break a fixed-term tenancy. We disagree. The company has since told us it will review its contract.
Oxygen said if the owner agreed to break a fixed-term contract, they expected all costs to be covered by the tenant including marketing and letting fees.
We’ll be reviewing rental contracts as part of our Play Fair campaign. If you’ve been given a contract you think contains unfair terms, let us know at email@example.com
Find out more about our campaign at www.consumer.org.nz/playfair