Landlords can ask tenants to pay up to two weeks rent in advance (s 23(1) RTA), and most landlords will do this. This counts as the tenant’s first rent payment. The landlord can’t ask for more rent until all of that rent has been used up.
As with all rental payments, the tenant is entitled to and should receive some form of receipt for any rent paid in advance (s 29 RTA). If the tenant pays by automatic payment or deposits the first payment directly into the landlord’s bank account, then the electronic record of the transaction will be sufficient. If they pay in cash, the landlord must give the tenant a written receipt for the rent at the time of payment.
Option fees
Another charge that a landlord can require is an 'option fee' (s 17(4)(a) RTA), though this is much less common. This is money tenants give to the landlord to hold the property while they decide whether or not to rent it. An option fee is an exception to the general prohibition against "key money" (see below).
The maximum amount for an option fee is one week’s rent. If the tenant decides to rent the property, the landlord must refund the option fee or put it towards rent. They cannot keep it as an additional payment on top of the rent.
Power, phone, internet and other utilities
There are a range of other costs that tenants face when starting a tenancy which are about paying for the supply of things like electricity, gas, phone and internet to the property. Tenants are responsible for paying for what they use (s 39(4) RTA).
In the case of water, tenants are responsible for paying water charges that are the result of actual water use, if the water supply is measured by a separate meter for the tenant, as opposed to fixed charges or estimated shared use for different flats.
Unlawful charges
Rent and bond are the primary charges a tenant will face at the beginning of a tenancy. At times landlords or their agents may try to charge tenants for other costs that are unlawful. It’s important to be aware of these.
Key money
It is unlawful for a landlord to require the tenant to pay “key money” (s 17(1) RTA). The Residential Tenancies Act defines key money as "money demanded for the grant, continuance, extension, variation or renewal of a tenancy agreement" (s 2 RTA). It is essentially a payment the landlord or their agent asks the tenant to pay simply for the privilege of being able to rent a house or flat – or taken quite literally, the payment required in order to get the key to the property.
There are a range of different kinds of administration charges that a landlord might ask for at the beginning of the tenancy, which may in fact be illegal key money. Sometimes these are written in the tenancy agreement as conditions of the tenancy. Examples of unlawful conditions are listed here.
Unlawful key money can also include:
- reimbursement for landlord's expenses, insurance premiums, rates and other outgoings
- one-off payments for additional chattels or other improvements
- management fees
- lockout fees and other financial penalties for certain behaviours
- special conditions regarding rent.
Letting fees
Letting fees are a form of key money and are similarly illegal (s 17A RTA). These fees are charges by letting agents (real estate agents, property managers) or lawyers that relate to setting up, extending, varying, or renewing the tenancy. This includes costs like listing and advertising the property, holding open homes, vetting applications and preparing the tenancy agreement. These kinds of charges have to be paid for by the landlord and can’t be passed on to the tenant.
The only situation where tenants may end up lawfully having to cover some of these costs is if the tenant wants to exit a fixed term tenancy early or to assign or sublet the property to someone else. In these situations, landlords and their agents can still ask for their reasonable costs to be reimbursed. These are also known as ‘break fees’ or ‘break lease costs’.
What can be done about unlawful charges?
If the landlord asks the tenant to pay costs that are additional to the rent and bond, there is a good chance that these charges are unlawful. The tenant should ask the landlord or agent to put the request in writing, so it’s clearly recorded why the request has been made.
If the tenant considers that the request is unlawful (because, for example, it falls under the definition of key money or is a letting fee, they or their advocate could write to the landlord explaining why the money will not be paid. A template letter to a landlord, challenging an unlawful charge, can be found here.
If the unlawful charge is stated as a condition in the tenancy agreement, the tenant may also be able to take one of the actions described in the Unlawful conditions section.
If a tenant does end up paying a charge that is in fact unlawful, or is concerned that if they don’t pay the charge this may impact on whether they can secure the tenancy, they can still seek to recover that money at a later date during or at the end of the tenancy (ie, it is not lost forever). See the section for information about resolving disputes with the landlord.
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