This short article looks at the changes we expect to be brought forward under the Renters' Rights Bill (RRB) to prevent "rental bidding wars".
The current position
In the private rented sector (PRS) landlords are currently free to advertise properties for rent at whatever level they consider to be the market rental value of the property. They are also free to accept a higher (or lower) rental figure from any potential tenant.
Due to the shortage of rental properties, particularly in certain parts of the country, there are often many potential tenants willing to rent each one. This can lead to landlords or letting agents running auctions or encouraging prospective tenants to bid against each other to set the final price for a property, driving market rents up and putting many tenants at a disadvantage.
What's changing?
The RRB aims to tackle these so called "rental bidding wars" with the changes set out in Chapter 6.
A landlord or agent may not advertise a property for letting on an assured tenancy in writing, unless a specific rent (the proposed rent) is advertised.
The only exception to this will be a sign displayed at the property merely stating the property is available to let.
There will be an absolute prohibition on a landlord or agent inviting or encouraging any person to pay a rent higher than the proposed rent, or accepting a higher rent than is advertised, even if this is offered without any encouragement on the landlord's part.
The local authority has enforcement powers and may impose a financial penalty (of up to £7,000) for any breach of these provisions. The fact that a penalty has been imposed will be recorded in the PRS database.
Any repeat offence within 5 years may incur an additional financial penalty, unless the final notice imposing the previous penalty has already been withdrawn or quashed on appeal.
Implications
These changes prevent landlords from accepting a higher figure than the proposed rent, but not a lower figure. Some commentators have expressed concern that this could inadvertently have the effect of pushing up rents in high demand areas. Landlords and letting agents may advertise properties at higher than market rent levels, with the intention of taking the best offer for a property.
Landlords advertising multiple properties, for example in new build to rent schemes, will have to consider how to advertise properties available for renting. Individual units are usually priced according to floor level, layout, aspect and, of course, demand. Under a strict interpretation of these new provisions, advertisements which include wording such as "1 Bedroom apartments available from £2,500 per calendar month" could potentially fall foul of these rules.
Property entries on the PRS database will need to correspond with any written advertisements.
What landlords should be thinking about now
- Accurate pricing of available units will be essential. Landlords will naturally want to achieve the best possible rental income from their properties, so should consider what the market value is and how demand is in the local area. Once the proposed price has been advertised, a higher rent cannot be accepted.
- Consider what your advertisements will look like in the future.
- Ensure that anyone advertising properties on your behalf is also aware of the new rules.
