Rental Bidding- New Zealand law in the UK

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Rental Bidding- New Zealand law in the UK

One of the interesting comments from Labour party figures recently has been about ending tenant bidding wars. This is not something that was in their manifesto but it was in a press release last week which was widely reported and also made its way into remarks by Angela Rayner and Kier Starmer. So it is clearly something they are seriously considering.

The same provision was echoed in two amendments that was tabled by Matthew Pennycook to the Renters (Reform) Bill as NC6 and NC7. Unsurprisingly these were not taken up by the Conservative government.

However, the amendments actually copy, almost word for word, a set of provisions in New Zealand which were introduced by the then-Labour government as part of a package of reforms in the Residential Tenancies Amendment Act 2020. Interestingly, although that government has now been replaced by a National party-led coalition this is not one of the tenancy reforms that they appear interested in changing.

The New Zealand legislation (and the amendments proposed in the RRB) required landlords to advertise a property with the exact rent figure sought. In the UK this is already seen as a requirement as part of material information under the Consumer Protection From Unfair Trading Regulation 2008. However, this change would have made the requirement absolute. The NZ provisions then go on to say that a landlord cannot “invite or encourage a prospective tenant … to offer to pay an amount of rent for residential premises that exceeds the amount of rent stated as part of the advertisement”. However, at the same time the provisions state that they do not prevent “a prospective tenant … from offering to pay an amount that exceeds the stated amount of rent.” So applicants can offer to pay more but they cannot be asked or encouraged to do so.

Unfortunately there seems to be little evidence of how these new provisions are being interpreted or whether they have even been effectively enforced in New Zealand. And it is this that brings me to the real problem with this kind of legislation.

First, it is relatively easy to evade. Landlords can simply increase the asking price to a sum greater than they ever expect to achieve and encourage tenants to bid up to that sum without asking them to bid over it. So properties simply get re-priced. Obviously if you do encourage the market to re-price rents in this way then you will probably increase rents as a side effect of that behaviour because the price anchor will be higher.

Second, it is almost impossible to enforce. It is not terribly difficult to convey to a tenant that they might well want to bid higher without ever asking for a bid over the advertised sum. I am no sales expert but I can well imagine agents saying things like “this property was priced fairly low compared to the market but we have had a lot of interest and some very strong bids”. That says nothing about the level that a tenant might wish to bid themselves but conveys a strong impression that any offer needs to be at the top-end or above. Second, unless a tenant is actively going to record what is being said to them (and there are challenges with admitting evidence from covert recording in the UK) then it will come down to one persons word against another. The courts deal with that type of situation all the time but it is not a good way to achieve effective enforcement of the law. If the legislation is unenforced then what will happen, as is so often the case in housing matters, is that good landlords and agents will comply while ignorant or uncaring ones will not, ultimately leading to no real improvement where it matters.

I can well understand a desire to reduce or eliminate pressure from landlords or agents which encourages tenants to bid against one another. However, my experience is that tenants need little encouragement to do this when they are under pressure to secure a property or where a property is desirable. Therefore I do not see that this sort of legislative change is likely to have much useful effect.

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