Now it's the tenant's turn to get gazumped
The practice that destroyed so many house purchases has invaded the rental sector as demand outstrips supply. Chiara Cavaglieri reports
Sunday 20 February 2011
Gazumping used to be the scourge of the housebuyer, but now, it's hitting the rental sector as well.
Tenants who are already paying through the nose after a year of rising rents face even tougher times ahead as competition for properties heats up. New research by FindaProperty.com shows that one in eight of those looking to rent has experienced rental "gazumping" in the past year, being outbid at the last minute by tenants with deeper pockets.
"This gazumping trend seems to be here to stay for the time being and it's spreading," says Nigel Lewis, an analyst for FindaProperty. "Agents are there to get the best price for the landlord and will pass on better offers so it is quite dog-eat-dog at the moment."
Although traditionally a problem for homebuyers, gazumping is a growing concern for tenants all over the UK, says FindaProperty, that but particularly in London and the South-East. This is largely down to the fact that rental demand is continuing to outstrip supply; the latest Residential Lettings Survey by the Royal Institution of Chartered Surveyors shows that fewer rental properties are coming to market and demand is increasing at its fastest pace since the end of 2008.
"There is an acute shortage of desirable one- and two-bedroom flats to rent at the moment because would-be first-time buyers are renting for longer. Other parts of the market are not facing the same drastic shortage, but there it is still not enough stock to meet demand from renters," says Stephen Ludlow, a director of London lettings agent Ludlowthompson.com.
With a lack of new stock and a spike in demand for rooms, landlords are in a strong position to push rents up. Figures from LSL Property Services show that average rents did fall for the first time in 11 months in December, by 1.2 per cent to £684. But Christmas typically marks a slow month and the news will do little to soothe tenants coping with average rents that rose by 3.8 per cent between December 2009 and December 2010. Buy-to-let specialist Paragon Group said that 41 per cent of the landlords it polled are planning to increase rents during the next 12 months.
As well as upping rents, landlords are cherry-picking the best applicants, resulting in many tenants being replaced despite having a verbal agreement in place. Many agents are also reporting an increase in the number of landlords asking for prospective tenants to lodge sealed bids, when interested parties put in their highest offer before a specified deadline, after which the landlord is free to take his pick. From a legal standpoint, there is little that can be done to avoid being gazumped because, until a contract has been signed, the landlord is free to change his or her mind about whom to offer a tenancy.
"A landlord and a tenant are bound to a letting only once they have entered into a contract (ie the tenancy agreement). This contract may be entered into before the start date of the tenancy itself, or it may be entered into on the day the tenancy is to commence, in which case there is an obvious risk of a change of mind on the part of one party or the other," says Tom Moran, partner at the law firm Speechly Bircham.
This means that even tenants who have paid a holding deposit – often hundreds of pounds – can lose out to another applicant because this deposit does not legally bind either party to enter into a tenancy. Holding deposits are designed to reserve a property until a tenant's references have been checked and the tenancy agreement is drawn up, but with landlords in a position to hold out for what they deem to be a better prospect, tenants could lose out. Furthermore, although this holding deposit should be returned if the landlord decides not to proceed with that particular tenant, some letting agents may ask for non-refundable deposits, leaving tenants without a home and out of pocket.
"If it is a non-refundable fee paid without any reciprocal obligation being undertaken by the landlord, then a tenant may lose this money even he or she is ready and willing to enter into the tenancy. The major message is that tenants should check what any up-front payment is for and the terms on which it is to be paid by them," says Mr Moran.
For tenants looking for ways to get ahead of the competition, it's crucial to understand what most landlords look for in a tenant. With many properties let within just a few days of coming on to the market, preparation is vital. This means setting a maximum rent, getting any documentation ready and raising the deposit in advance to avoid any stumbling blocks. For tenants sharing a property with friends, it can help to agree beforehand to be jointly responsible for the rent, instead of singly responsible which may put some landlords off.
"I think most landlords will consider reliability as important as price. What a landlord really wants is to have people who are organised, tidy, and who pay the rent on time. I would say that if a tenant has their references and the deposit ready and comes across as being on the ball, they are much less likely to be gazumped," says Mr Lewis.
Above all, tenants should make sure they sell themselves to the landlord and highlight anything they think might swing the decision in their favour. For example, young professionals with a steady income should be sure to mention this clearly when applying. For those without a reliable flow of income, securing a guarantor such as a parent or homeowner will go some way to persuading the landlord that they aren't a risk.
"The lettings market is no longer a buyers' market and the onus is very much on tenants to sell themselves to the landlord. If there is a reason why you might be more attractive as a tenant, let the agent know about it," says Mr Ludlow.
Nigel Lewis, FindaProperty
'With property sales, once you get to the stage of exchanging contracts, there is a degree of restriction on what happens next. But with renting, until you've signed your contract, which can be very late in the day in many cases, someone else can come in and snatch it from under your feet.'
Case Study: Matthew Kattan, 26
A media buyer based in Clapham, Matthew Kattan fell victim to this trend last year when his move into a two-bed flat in Fulham went awry at the last minute.
"It was last October and I was living in Shepherd's Bush at the time but I found somewhere quite easily and put a holding deposit down so everything was going forward," says Matthew. "But the landlord pulled out a week before my friend and I were to move in.
This news came despite there being no issues with any references, or their ability to pay, and when pressed, the lettings agent simply said that the landlord had decided to go with someone else. Fortunately, Matthew had a friend with a spare room in Clapham and was able to move in there instead, but the experience has reminded him how vulnerable tenants can be.
"I wasn't left out of home but my friend had to crash on someone's couch for two weeks. It's just the nature of the business; lettings isn't regulated well and until you move in nothing is sure so if a landlord gets offered more money they are going to take it," he says.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Simon Read: Timeshare owners accuse Macdonald Resorts of land grab
Five Questions: Changes to car tax discs
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Win a new iPhone 6
More than 300,000 adults are too deeply in debt to apply for bankruptcy
- 1 Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
- 2 Stamford Hill council removes 'unacceptable' posters telling women which side of the road to walk down
- 3 Kim Kardashian 'nude pictures' leaked on 4chan weeks after Jennifer Lawrence 'The Fappening' scandal
- 4 Alex Salmond: 'The rocks would melt with the sun before I'd ever set foot in the House of Lords'
- 5 Ice Bucket Challenge: US firefighter Tony Grider dies after participating in charity craze near power lines
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize