New research reveals that Generation Rent could be better off than first-time buyers in many parts of London.
Robert Holmes & Co, an independent estate agent in Wimbledon – where property values have jumped 8.1% in the 12 months to July 2015, according to the Land Registry – reports that a study shows that renting a two-bed home in London costs £1084 less per month than buying a similar property.
The research that was conducted on behalf of Zoopla, a website that lists properties that estate agents have for sale and rent, looked at asking prices and rents for two-bedroom properties currently on the market and calculated that tenants in London are paying £13,008 a year less than first-time buyers.
Not only that, tenants avoid paying the £17,500 stamp duty bill that purchasers of a £550,000 home (the average cost of a house in London) must cough up.
But with landlords in London now charging tenants an average of more than £1500 per month, an in areas such as Wimbledon more than double that amount, finding a property to rent within the M25 that matches your budget, lifestyle and has good transport links will mean making a number of compromises. These could include the all-important consideration of location.
With property for sale in Belgravia and other sought-after areas of the capital carrying a price tag only able to be met by wealthy football club owners from Russia, the majority of tenants rent a home in London’s suburbs.
There are exceptions, of course. Chelsea FC owner Roman Abramovich’s property portfolio includes a multi-million pound pad in exclusive Eaton Terrace, Belgravia, that he allowed club manager Jose Mourinho to live in rent-free after his team won the Premier League title in 2005.
It is not reported whether Mourinho had to sign an assured shorthold tenancy agreement or pay his boss any fees to seal the deal.
Before you approach letting agents in Harrow, Hammersmith, Hackney or any other commuter hot spot, tenants should be aware that they will have to pay fees to secure a rental property.
The most important thing a tenant needs to know
The good news is a recently-introduced piece of government legislation makes it illegal for letting agents to include hidden charges in their fees.
Section 83 of the Consumer Rights Act 2015, which came into force at the end of May, now forces letting agents to make clear exactly how much landlords and tenants will pay before they enter into any form of contract or agreement.
Specifically, the main points of Section 83 to note are that…
• The description of each fee must enable the person who is liable to pay it to understand the service or cost that is covered by the charge or why it is imposed.
• All fees, charges and/or penalties must be quoted inclusive of VAT.
• Fees, charges and/or penalties must be displayed prominently (where it is likely to be seen by landlords and tenants) at all premises where the agent deals face-to-face with potential and actual tenants and landlords. The test of whether they are displayed correctly is likely to be whether the consumer had to ask to see the fees list.
• Fees, charges and/or penalties must be displayed in full on the agent’s website.
• Surcharges and hidden fees must not be used.
• It must be clear whether the charge is per property or per tenant.
• If the fee cannot reasonably be determined in advance, how it will be calculated must be clearly explained.
• There should be no duplication of charges between tenants and landlords, although it is acceptable to split charges between those parties when this is clearly explained in relation to the total cost of the specific service.
• Letting agents in England must publicise their Property Ombudsman membership, if this is their chosen redress scheme, through their website, office documents, window display, terms of business and fee list plus any client money protection scheme membership.
Tenants in England and Wales who rent a home from a private landlord and have signed an assured shorthold tenancy agreement should also be aware that their security deposit is protected by law.
Since April 2007, private landlords are obliged to put their deposit in a government-backed tenancy deposit scheme within 30 days of receiving the payment. This guarantees they will get the full deposit back at the end of the tenancy provided they met the terms of the tenancy agreement.