Renters’ Rights Act triggers “inverse bidding wars”

Letting agents are reportedly advertising properties at higher rents to start “inverse bidding wars” among tenants.

Journalists now report that letting agents are showing prospective tenants properties out of their price range, and then telling them that the landlord will accept lower offers.

What’s going on? The Renters’ Rights Act made it illegal for landlords to accept any offer over the advertised rent. But there’s nothing to stop a landlord or agent from setting a higher rent with the expectation that tenants will offer below it. Indeed, property professionals had warned that this could happen.

That can make prices less transparent, making it tougher for tenants to see which properties are within their budget and how much they may need to pay to secure a home.

Dangers for landlords – and the market

Setting a higher rent can sound like a good strategy, but it’s not risk-free.

Tenants can now challenge the starting rent at the First-tier Tribunal within the first six months of starting the tenancy. If the rent is out of step with the local rental market, the Tribunal can lower it.  

Even so, that opens up new problems. The Tribunal assesses market rents based on the evidence submitted by landlords and tenants, which will usually be comparable property listings from the portals. If enough landlords artificially inflate advertised rents, it could make local market rents look a lot higher than they really are.

In future, the government’s private rented sector database could help solve this by letting tribunals see the rents local tenants are actually paying. But until then, landlords, tenants and tribunal members could be left in the dark.