Finding a property is hard enough. But I found renting in England complicated. But there is a simple rule that one should never forget: Read it, read it, read it. And that’s what I’ve been doing these past couple of weeks.
The thing about living in London is that everything is expensive. And property-wise, you don’t get much space for your buck. Except maybe now, whilst London is still in the midst of its recession from the Global Financial Crisis. Probably the same with New York. Bankers have left, so rentals are down, and more property is available.
But, some things stay the same in recession as in good times – real estate agents. Tactics like – suddenly a whole lot of people are interested in the property – are still used. And they’ll tell you that they all use “standard” tenancy agreements. But “caveat emptor”, or buyer beware, some agreements are more standard than others ….. as I recently found out.
The rental process for London (as compared to Sydney)
1. You visit an agent to ask about properties. They will sit you down and ask you for your critieria. Generally, this is how many bedrooms, reception room (that’s the “formal room” in Australia), bathrooms, extra space (garage, garden or storage) you need. They will then organise to take you out for an inspection of various properties. This is different to Australia, where you take yourself to inspect these properties.
2. You visit and if you’re lucky, you’ve found something you like. You decide to put an offer in.
3. In Australia, this begins the formal process. The rental agent has the contracts, which a prospective tenant takes away with them if they are interested. They then read over the details and put an offer in. In London, the process isn’t quite so formal. You make an informal offer, which is then negotiated upon. The key difference is that UK practice allows for a wishlist. That is, you make the offer on your price, but you request for specific changes to the property. I suppose you can do this in Australia also, but in my experience most people take what’s there as given. In the wishlist, you can ask for all sorts of things, like a new built-in appliance, new light fittings, fix up stuff etc. This was a novelty to me. Of course, the landlord can disagree to install these items, but this is part of the negotiation.
4. Like everywhere else, you start to haggle on the price.
5. Once agreed on price, you are pretty much done. The agent does the reference checks, takes the deposit etc.
6. In London, the agent takes the agreed price and the agreed Special Conditions (Wishlist) and puts it in an agreement. You read the agreement, sign it and pay the Deposit. Seems straightforward?
Here are a couple of complicating factors that only experience teaches you.
1. What is the market value, and are you paying it?
2. What exactly are you signing up for?
Negotiating for Market Value
In Australia, pretty much what you see is the asking is very close to market value (I think, anyway). Sure, some landlords ask a bit more, but it’s generally within the ballpark of a range of +$50 a week. In Australia, there is also a general pattern you can see, depending on the type of property you are renting eg. apartment, house, duplex in different locations.
In London, or more accurately in Richmond, property prices can differ even if you are in the same block! It just depends on the Landlord and how much he needs to pay the mortgage. What the custom here is that landlords will ask for a heck of a lot more than it is worth to see what they might get. From my research, landlords are asking for between 150 to 250 pounds more than what they want (not necessarily market value). This converts to between AUD$300 to AUD$500. So determining true market value, when you are new to a place, is tricky.
Do Your Research
We all know this. But you will really pay for it in London if you don’t do this. Here are some suggestions on starting:
1. Research properties before you travel. Find a couple of good internet websites and start looking. Preferably narrow down where you are going to live and concentrate on those areas. Use google maps to help you navigate, and try to work out why some properties in some areas are more expensive than other areas, and work out the pattern.
2. If you consistently spend time researching, you will start to notice when properties have rented. Note these. Even if you don’t know how much it actually rented for, you can estimate it from the asking price. You will also notice which properties went quickly, and which is staying on the market for longer. The assumption I made was that if a property rents relatively quickly, then it was probably closer to market value for that type of property.
3. When you get to London, make time to go out and see as many types of properties as you can, with as many different agents as you can. This will give you a sense of how much you can buy with your rental dollar, and what you might actually be prepared to live with. Just a note: if you expect to live in a place similar in quality to Australia, be prepared to pay for it. (We really are quite lucky in Australia.)
4. If you get a chance to ask a local, get their opinion on how property is doing. Why? When you start negotiating with an agent, they will tell you all sorts of things. (Remember I said some agents play games?) They will even tell you that lots of people are interested, and that things are picking up, and a lot of people are moving into the area. You just want to make sure that the information you are receiving from the agent is consistent to information you’ve heard elsewhere. (One bit of information that a local told us that was useful is that landlords are expecting a vacancy of one to two months before it is filled. Very important information that a real estate agent wouldn’t tell you.)
Do you know what you are signing up for?
Right. You’ve done your research, you’ve negotiated your rent, you’ve even managed to get the landlord to agree to your wishlist. Yup! Pretty much the key terms are all done. Now for just the “operational” bits like getting reference checks done, drawing up the agreement and paying the deposit. Standard stuff, we have that in Australia too!
You will hear real estate agents say their agreement is standard. Here’s the truth: they are not. Standard obligations are not drafted in a standard way, and some agreements are drafted much more aggressively than others. Unless UK moves to legislate residential tenancy arrangements completely, treat every agreement as different. What does this mean? Read it! Read every single word of it, and if you don’t understand it because its gobbledy-gook, then don’t sign it until you understand it.
Because, you may be signing on to more than you bargained for.
When we went through our agreement with a fine toothcomb, we decided not to proceed because we disagreed with the obligations in it, which was drafted wholly in favour of the landlord. The agreement clauses irrelevant to our tenancy, required us to take on maintenance activities on the property that the agent did not disclose prior (ie. clear the gutters and check for frost damage during winter and clean the external windows every 2 months), and snuck in a clause that interest on our deposit belonged to the agent. We felt these obligations to be unreasonable.
We tried to negotiate on the terms. In fact, I had to amend about 20 clauses. In the end, it got too hard and we decided to simply start again with a different proeprty. As we were walking away, the agent then got pretty aggressive in her communication to us. We then shut the door completely on that relationship and are quite relieved to have done so. And we were glad to have done so. If this is how it was going to be at the beginning, it doesn’t bode well for the rest of the tenancy.
Ninety percent of the time, everything will go smoothly. But consider what might happen ten percent of the time. Aggressive agreements sets up a relationship that empowers aggressive agents. And if you’ve signed, there’s not much room to move if anything unfortuante happens.
What happened next?
We went out to look for another property. But before we negotiated on it, I asked to see their pro-forma agreement, and again reviewed it carefully. Happy with it, we proceeded further.
We also did not involve our relocation company in the negotiation process. In the end, we felt that they did not provide the best guidance, particularly when they kept telling me that the 1st contract was standard and that these types of clauses were standard, and that they were concerned that we might lose this property. Not a response I expected in this current climate.
We’ve also realised that the primary purpose of the relocation company is not to get you the best deal. They are there to get you into a property within your stipulated budget, and within the timeframe stipulated by your sponsor. But they have no “skin” in the game. In the end, it’s your skin that’s paying for the place. During the 1st round of negotiations, we did try to be as involved in the process. But, in hindsight, we realised that we were still cut out of the communication process, and missed all the non-verbal cues in the undercurrent of conversation.
We also pulled together our wishlist. And we costed it, so that we knew how much it might cost the landlord to agree to our wishlist. We also did a budget for each property we were interested in, including expenses that we might have to spend to bring all the properties to the same level, ie compare apples for apples. Finally we prepared our negotiating strategy document, including our pricing strategy based on various mathematical formulations.
Things went according to plan, and I’m happy to say we did better than we thought. We’re definitely satisfied.
For those interested: A Summary of Handy Tips
It’s not rocket science, and it’s nothing new. But when you are in a new place with new customs, it can seem pretty confusing. And in trying to get everything done, some things might get forgotten. Here’s a list that might help:
#1. Do your market research.
#2. Do a budget, comparing all the properties you are looking at. Include all costs that don’t form part of the rental negotiations, ie. the agent’s administration fees, and local council tax. (By the way, local council tax can cost up to $200 pounds per month, so it’s worthwhile not forgetting this.)
#3. Remember you are negotiating in pounds. It’s easy to think the numbers look quite small (and affordable).
#4. Go agreement hunting. Find an agent that has an agreement that you are comfortable with. Exercise your consumer choice. Also, agents would be less likely to pull a fast one if they know you are on the ball. Remember, the agreement sets the relationship.
#5. If you’re not comofrtable, walk away. Don’t become too attached to the property.
#6. There are reasonable agents with reasonable tenancy agreements out there. You just have to find them.
#7. If you have a relocation agent negotiating the lease on your behalf, don’t. Tell the relocation company that you’d like to negotiate the lease directly, but with their guidance. You are, afterall, the one paying the rent.