A BBC report provides insights, correlating with Hamptons’ findings, where more than 25% of tenants had been asked to provide 3 months rent ahead of their arranged tenancies, and nearly 7% of tenants had been asked to pay 6 months’ rent in advance. For many, this is an impossible financial burden.
Tenants paying 6 months' advance rent were hovering around 4% in total three years ago, versus nearly 7% today. Thanks in part to the current rental climate, there is significant competition in most parts of the country, particularly large cities such as London and Manchester, where tenants must win a bidding-war to secure a property due to high demand and a worrying lack of available properties.
In London, 29% of tenants paid at least 3 months’ rent in advance this year – the highest level in the country, with average rent sitting at around £2,000 PCM. Many tenants find themselves settling for undesirable property or risk losing access to living in certain areas. Many landlords are now listing their properties for sale, due to myriad reasons including high house prices, shortening financial security and cost of maintenance and arguably punitive legislation, further diminishing the supply.
Recent Government financial policy hasn’t helped. Chris Norris, from the National Residential Landlords Association (NRLA), said as dozens of landlords were unable to keep up with higher prices, there was a lot of concern about how they would be able to pay their mortgages as economic conditions worsened.
He stated ‘it is being driven by massive under supply, coupled with uncertainty about what's happening with interest rates and with buy-to-let mortgage deals over the next few months, and landlords trying to hedge their bets in terms of affordability.’
David Fell, from Hamptons estate agents, mentioned paying rent upfront had previously been common for expensive inner-city properties and in cases where tenants did not have a regular monthly income. However, he said the situation has changed as more landlords asked for early payment. In other cases tenants have been willing to pay up front in their own judgement, to secure their dream property.
Fell explained: ‘The shortage of rental stock means the practice of handing over rent in advance to landlords is creeping into cheaper markets too as tenants try to stand out. Landlords would often take rent up front as a way of ensuring immediate payment, when renting to freelancers such as Deliveroo drivers and others with irregular incomes.’
Wectory is a service which offers up to 12 months’ upfront rent to landlords, whilst removing the pressure from tenants. Wectory further aims to improve the cash flow for landlords in a bid to give them increased financial freedom. What’s more, up until the 17th of October, Wectory is reducing its fee to 5.9% for landlords who join through a partner letting agent. Letting Agents, you can sign up, free here.