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19 November 2004

Fees for Landlords

How much is reasonable?

We have just purchased an investment property in a Melbourne suburb.

The property is under both a Manager and Sub-Manager, which we were aware of prior to purchase.

Having just received the Authority to Let documents, I am worried about a clause which states that we are expected to pay two weeks letting fee for locating a new or replacement tenant.

We already have another investment property in Victoria and only pay ONE weeks rent + GST for the letting fee. We also have two properties in Qld and still only pay ONE weeks letting fee.

It would be appreciated if you could advise just what the REIV rules are for charging Letting fees.

Thank you for your time.


For comment on this issue, we asked a trusted agent for his opinion. Here it is…

There is no set REIV scale for letting fees. These are deregulated, just the same as selling fees, so agents can charge whatever they feel the market will bear, commensurate with the levels of service they offer.

Two weeks letting fee sounds excessive based on my knowledge of the rest of the market. Our office charges 3% + GST which works out to around one and a half weeks rent, however we only charge this on a new tenancy and not on renewals of the lease for an existing tenant.

Our charge for a renewal is a flat $50 + GST. I know many agents charge one weeks rent every time the lease if renewed, but we feel this is excessive.

We charge a management fee of 8% which includes a lot of extras, whereas many agents charge between 5% & 7% management but charge significantly for extras such as statement fees, etc.

Unless the existing management arrangement was a condition of the sale (which would surprise me and I think would be unenforceable in any case) then the client can elect to use another real estate company as their managing agents. They do not have to go with the one who seems to be charging a significantly higher management fee for their services.

It is important, however, for the client to look at the total management package offered as some agents charge significant additional costs, whereas others charge a higher letting fee, but include extras in the amount.

I hope this assists.

John Tucker
Finning Real Estate
03 5996 1200 (24 hours)

If you wish to send a question or comment to Neil Jenman you are most welcome. Neil tries to read every e-mail and respond personally. We have posted some of the common questions together with those we feel may help you. Thank you for your interest.

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