28 June 2010

'Rent by negotiation'

| Amanda Hugankis
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I’m looking for a rental property through allhomes, and I keep coming across this – ‘rent by negotiation’. Can anyone tell me how this works?

I know it might sound like its obvious – but I’m wondering if there is more to it? Is it essentially a rental auction? Am I missing something?

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colourful sydney racing identity said :

essfer said :

I’ve never seen so many people pissed off by the opportunity to negotiate .

You must be a property owner. If you don’t realise why this is a bad thing you simply don’t understand it.

Far from it, I’m a renter.

Rental auctions are illegal in the ACT (and rightly so, it is simply taking advantage of those who can least afford it), and any agent caught inciting an auction can face heavy sanctions and/or fines. The legislation is in place to prevent unscrupulous owners and agents from taking advantage of an already tense situation.

We all know that the cost of renting in Canberra is painful enough without having agents/owners driving up the market value by “auctioning”. Right or wrong though this simply illustrates low supply and high demand – which is basically uncontrollable, and supply/demand is the cornerstone of a free capitalist market.

The examples I have provided though reflect a high supply and low demand.

With so many properties available in The apARTments the owners are offering ‘by negotiation’ not to railroad potential tenants, but to increase their chances of negotiating ANY tenancy (even below “market” value) before one of the other identical properties, thus minimising their loss through vacancy. If that is not indicative of high supply and low demand I’m not sure what is.

You’ve clearly missed my point entirely. Good work.

colourful sydney racing identity2:40 pm 18 Aug 10

essfer said :

I’ve never seen so many people pissed off by the opportunity to negotiate .

You must be a property owner. If you don’t realise why this is a bad thing you simply don’t understand it.

I’ve never seen so many people pissed off by the opportunity to negotiate. Don’t get me wrong, the auction that clownkiller described is abhorrent but I’m hoping these instances are so seldom as to make them insignificant.

Presently on allhomes there are 16 “by negotiation” rentals (hardly epidemic). Of these:

* 8 are not even through agents. Of the 8 that are, the majority are in the city in an overcrowded market (see below)

*10 are high end inner-city apartments, for which the market has recently been flooded with the settlement of the apARTments in Acton (of which there are at least 14 currently on the rental market at large)

* 9 are fully furnished properties, for which the market is diminished at this time of year, particularly under a caretaker government.

Given that ‘price by negotiation’ is usually only seen on more expensive properties this actually offers an opportunity to get the property for cheaper than it may have been advertised. The higher end of the rental market is considerably smaller than the middle/lower market, meaning the potential tenant has more bargaining power, hence the blatant request for a negotiated outcome.

And to all those landlords out there who’s agents don’t bother explaining rental increases and the CPI-based ‘fair increase’ formula – you need a new agent. Good property managers are our there, they’re just let down by the other idiots giving them a bad name.

thehutch said :

1. No political will;
2. No funding or trained staff to investigate;
3. Difficult to prove in tribunal;
4. The community is more than willing to report alleged fraud, but never actually want to do so on the record or provide formal statements and go to court (why would you want to). It would be great if that didnt need to (why should they need to)… but no legislative powers that makes it easier to prove without this;
5. Ex-partners well renowned for making false allegations – very much a your word against there’s scenario – unless they’re stupid enough to leave a paper trail;
6. No political will.
7. Some (minority) people do get caught.
8. No political will.
9. Most Public Housing tenants do the right thing, the minority give everyone else a bad rep. Sadly this minority has been rorting the entire welfare ‘system’ for a long time and probably will into the future… used to piss me off – now i just realise that i work hard and will end up having a better life than someone who thinks they will get ahead by rorting the system. Karma comes and catches up with you eventually.[/quote>

Hutch: There is a common tone to your post that makes it sound like Housing ACT is either spineless or castrated by policy. I’d say a little from column A, a little from B.

Your points are spot on as always, but I think it’s also important to note that these people who continue to rort all welfare systems will find ways to do it regardless of what action is taken by the relevant authorities. True that Housing is a toothless tiger, but even if they had the ability to do anything about it the rorters would just circumvent it.

If only these leeches would put as much effort into their careers and lives as they do into wasting my tax spend, we’d have a near utopia.

Lastly, the Tribunal is just as much to blame for giving these tenants innumerable chances to try again. Or worse when they are proving a point to Housing in administative protocol. The whole system is written wrong.

Capital punishment for welfare fraud would probably be enough disinsentive, but I can’t see it happening.

Amanda Hugankis11:14 pm 29 Jun 10

Sure Troll-sniffer, I do see ur point. But while I am luckily not in this position, I can see instances where the rental is for a family with kids, ur lease was up in 4 weeks 2 weeks ago & ur landlord said ‘no renewal’ as they want you out of the place you’ve been in for 4 years as they’re gonna sell/move in/pretend to renovate and up the price $85 a week. So you’ve got 2 weeks left to find something, you’re getting desperate and this is the first place that’s accepted your application, and the agent knows it. Do you turn it down out of fear you’re being manipulated and might end up paying more than what it’s worth? Or do you just find a way to squeeze another $80 a month out of the family budget so you can get your living situation settled?

I have no problem with trying to test the market for a property’s relative value – but I would personally like to see the process run fairly, with some transparency that would provide tenants with some level of assurity that they aren’t being exploited.

Again, I’m grateful I’m not in a vulnerable position.

troll-sniffer6:35 pm 29 Jun 10

Still having trouble seeing a problem. You arrange to inspect the property, and based on what you see you put in an offer to pay say $560 per week for a 12 month lease.

Then you wait, same as fixed price rentals. If you get the place all is good, if you don’t it’s just the same as 99% of tenancy applications that don’t get accepted.

However if the agent calls you and says they’ve received an offer for $580 would you like to up your offer you terminate the deal on the spot even if they then come back and say you can have it.

Or am I missing something?

Amanda Hugankis3:16 pm 29 Jun 10

Ok. Did a bit more investigation (Nancy Drew like). Phoned the agency about a particular apartment with the price listed as ‘by negotiation’, asked what it was all about. Its a 3 bedroom apartment at the top of a hill in an inner south suburb, with great views of the golf course & surrounds. The owners are looking for ‘offers’ around $600. I asked about the process – there is a spot on the form where you can write what you want to pay. So I ask ‘okay, so essentially, provided your references check out, it would most likely go to the highest bidder?’, and response was ‘basically, yep’.

So now we all know the story.

In response to those that ask about the difference between this and a house for sale/auction, well, there are rules about how these things are conducted – rules for good reason, and the the process is much more transparent. There must be something bad about it – most real estate institutes around Australia take the matter very seriously. It might be a practice reserved for those more elite properties right now, but in allowing it to happen, so could also become the thin edge of the wedge … eventually filtering downward into the lower realms of the rental market.

I believe that Blackshaw once tried to launch it as a more transparent practice, so that it was as fair as it could be (?) for all those wishing to participate. The way it is now just seems like you they could (do) manipulate the situation to their and the landlord’s ends.

Troll-sniffer: There’s a lot more to being a successful landlord/investor than simply seeking to maximise wealth.

I agree with you, Im actually hassling out the ACT Govt and stoopid land taxes.

georgesgenitals2:32 pm 29 Jun 10

troll-sniffer said :

There’s a lot more to being a successful landlord/investor than simply seeking to maximise wealth.

Very true. I try to treat my tenants as ‘clients’, and find that by applying that principle, we establish a relationship where I take care of the tenant (sensible rent, property maintained, etc), and the tenant takes care of the property and pays rent as agreed.

So far it has worked very well.

troll-sniffer2:19 pm 29 Jun 10

BundahBoy said :

georgesgenitals and troll-sniffer:

…when the ACT Govt jacked up the UCV on my house by over 140k last year my land tax and rates went up with it. I needed to put the rent up to pay the extra debt and my agent said that it wasnt allowed. Maybe just her rules?

You are only allowed to put the rent up once per calendar year on a rental property. That is probably what your agent was trying to convey. In addition, a rental increase after the twelve months must be reasonable. That provides a certain level of security for a tenant. An opportunity exists at change of tenant and lease to reset the rent if it has fallen behind market rents, and in your financial planning allowances should have been made for all sorts of contingencies such as interest rates, guvmnt charges etc.

I see you mention that you use an agent. A wise move if you can afford it, but if ends aren’t being met, manage your property yourself and save close to 10% of your valuable income. When good times return, employ an agent again.

My tenant recently rang me to let me know the lease was about to end and did I want to increase the rent. I said no, as she’s a perfect tenant, perfect payment record, never rings me about frivolous matters etc. So she’s currently on an effective discount of maybe 15% against full market rent, however the unit is occupied and there’s no risk of losing a swag of rent to a bolter as happened last time I let an agent manage my property.

There’s a lot more to being a successful landlord/investor than simply seeking to maximise wealth.

georgesgenitals2:15 pm 29 Jun 10

BundahBoy said :

georgesgenitals and troll-sniffer:

Unfortunately I cant supply a link however when the ACT Govt jacked up the UCV on my house by over 140k last year my land tax and rates went up with it. I needed to put the rent up to pay the extra debt and my agent said that it wasnt allowed. Maybe just her rules? In keeping with haveing as little to do with the ACT Govt as possible I didnt investigate, or care.

Anyways this is missing the point of my argument. YES: UCV raise, land tax raise, rents go up. Simple. I was mearly making an argument that if tenants were better informed of taxes they may be able to understand why rents have been rising of late. Also that the Govt should review the land tax to multiple property owners rather than the ‘everyday Canberrans’ they say they are trying to protect.

Thanks for clarifying. I think you may have been breaching the maximum rent increase rule, which is Rent*(CPI+(CPI*10%)) per year. Of course, when you get a new tenant, you can set the rent at whatever the market will bear. To my mind, the tenant won’t care much about your costs anyway (you are, after all, an evil rich landlord – BWAHAHA).

Completely understand your rationale, though, and it sounds like your heart is in the right place.

I would imagine that most decent property managers (if that’s not a tautology)

actually, ck, it is more an oxymoron… 😉

georgesgenitals and troll-sniffer:

Unfortunately I cant supply a link however when the ACT Govt jacked up the UCV on my house by over 140k last year my land tax and rates went up with it. I needed to put the rent up to pay the extra debt and my agent said that it wasnt allowed. Maybe just her rules? In keeping with haveing as little to do with the ACT Govt as possible I didnt investigate, or care.

Anyways this is missing the point of my argument. YES: UCV raise, land tax raise, rents go up. Simple. I was mearly making an argument that if tenants were better informed of taxes they may be able to understand why rents have been rising of late. Also that the Govt should review the land tax to multiple property owners rather than the ‘everyday Canberrans’ they say they are trying to protect.

The ‘by negotiation’ is also the vanilla response in the drop down boxes on allhomes. Maybe user was too lazy to proof read their efforts…

troll-sniffer8:54 am 29 Jun 10

BundahBoy said :

Totally off topic but totally worth bringing up anti ACT Govt rant here…

The ACT Govt is so guilty of the problem it created it doesnt want anyone taking it out on them at the ballot box so landlords in the ACT are prohibited from informing tenants of the taxes incurred by renting property.

Never heard of this. Can you provide a link to verify? I don’t imagine you can as the tax rates across Canberra are pretty well public knowledge, not necessarily to the last dollar but enough for good generalisations. If I choose to provide my tenant with a rental statement detailing rent received and expenses outlaid including land tax and rates then as far as I am aware I can, although I can’t imagine I would ever have reason to.

georgesgenitals8:54 am 29 Jun 10

BundahBoy said :

The ACT Govt is so guilty of the problem it created it doesnt want anyone taking it out on them at the ballot box so landlords in the ACT are prohibited from informing tenants of the taxes incurred by renting property. Even though it should be the landords burden to pay the taxes, tenants have the right to know why their rent keeps going up again, oh and again, and again.

Hi – can you expand what you actually mean by this? The rent charged on a property is not related to tax (expenses or liabilities) incurred by the landlord. Rent is set according to market, and rises with it. There’s no reason why a landlord would explain or justify their tax position to a tenant. Also, I understand that the ATO can actually ask you for extra tax if they can prove you are paying a material amount below market, and as such getting a tax free benefit.

Don’t get me wrong, I’m not endorsing the current system, just curious as to your interpretation of it.

Totally off topic but totally worth bringing up anti ACT Govt rant here…

Biggest loser with regards to renting in the ACT? Renters. Why? The ACT Revenue office have decided to put a jihad on anyone who wants to get on the property ladder with their draconian land tax laws. In reality this policy starves the ACT market of rental properties and forces landlords to charge higher rentals if they dare to invest. Queanbeyan anyone?

Sure, the landlord is reaping tax benefits from the property in the first place, but most are small time investors and these taxes dont encourage ANY investment.

But the ACT Govt says its all good! They say the high land taxes protect the everyone including the little people that live in the Stewart Flats in Manuka that dont pay rent in the first place. Why would anyone want to let evil property investors from Sydney turn the Stewie Flats into Bondi Junction? Not me. But surely theres another way to stimulate investment?

The ACT Govt is so guilty of the problem it created it doesnt want anyone taking it out on them at the ballot box so landlords in the ACT are prohibited from informing tenants of the taxes incurred by renting property. Even though it should be the landords burden to pay the taxes, tenants have the right to know why their rent keeps going up again, oh and again, and again.

But perhaps I shouldnt be so hard on Johhny 2 and his mates at ACT Rev, I mean lets face it, what other revenue streams does the ACT Govt have except housing rates and land taxes? Pine forests? Gone. Public Transport? Money pit. ACT Taxis? Yep.

Ahh..thats better.

What’s wrong with a rent auction? Is that also a problem with any other type of auction?

Quickly finding the market value seems like a good idea. While having fixed prices may result in some buyers getting a bargain, wouldn’t it also mean properties sitting vacant while sellers who over estimate their value wait and slowly lower the price.

Clown Killer10:45 pm 28 Jun 10

It’s the purest way to find the market value, I guess. Of course, it’s not a nice thought for a family to have to drive from property to property getting steadily more desperate, and would mean some people who be taken advantage of for sure

Agreed GG. In reality I suspect that there would be a fairly limited application for this approach. I’m guessing that it would work for ‘trophy’ properties the likes of which are found in Forrest, but probably not for your average suburban three-bedder. For a genuine market price to be set under these circumstances there would have to be a good supply of willing bidders – I suspect many prospective tenants would give rent auctions a wide berth. So then you end up with the same demographics you get a sale auctions – the cashed up and the desperate.

nazasaurus said :

“ACT Government is fully aware of the situation and has done nothing”

What do they say when these things are reported?

I’ve experienced a similar situation of reporting a bad pub housing tenant only to be told for ‘confidentiality’ reasons I would not know the outcome. The outcome was that absolutely nothing happened.

It makes you wonder about the mentality of these bureaucrats.. or can someone enlighten me as to what the obstacles are in investigating these people and actually penalising them.

1. No political will;
2. No funding or trained staff to investigate;
3. Difficult to prove in tribunal;
4. The community is more than willing to report alleged fraud, but never actually want to do so on the record or provide formal statements and go to court (why would you want to). It would be great if that didnt need to (why should they need to)… but no legislative powers that makes it easier to prove without this;
5. Ex-partners well renowned for making false allegations – very much a your word against there’s scenario – unless they’re stupid enough to leave a paper trail;
6. No political will.
7. Some (minority) people do get caught.
8. No political will.
9. Most Public Housing tenants do the right thing, the minority give everyone else a bad rep. Sadly this minority has been rorting the entire welfare ‘system’ for a long time and probably will into the future… used to piss me off – now i just realise that i work hard and will end up having a better life than someone who thinks they will get ahead by rorting the system. Karma comes and catches up with you eventually.

troll-sniffer10:42 pm 28 Jun 10

Can’t see the problem. The agent and or owner aren’t sure of what the current rental that the property is capable of achieving and are inviting prospective tenants to make an offer. By negotiation does not necessarily mean to the highest bidder I imagine (unless the owner is a fool). A prospective tenant with gold references ready to move in immediately for a long term lease could possibly offer $20.00 per week less than a couple of tradies who roilly roilly need the place and still get the lease.

So unless the term ‘by negotiation’ is code for a rent auction I can’t see any problem with the concept.

Amanda Hugankis9:06 pm 28 Jun 10

Okay so it seems as obvious as I thought – it’s essentailly a silent auction – chuck ur bid in and if ur the highest bidder … you win! The place I’m currently interested in is a basic apartment, so not much I can negotiate in exchange for rent unless I go with Sexynotsmart’s sugesstion of offering up goods of an intimate nature. Maybe I can offer to cook the landlord dinner every second Tuesday, or maybe name my first born after them. Or maybe leave the agent and their landlord to fleece someone else.

georgesgenitals8:39 pm 28 Jun 10

Clown Killer said :

The rent auctions are a different creature altogether. The model proposed by some Canberra property managers was essentially based on the property sale model – a crowd of prospective tenants would gather on the front lawn of some freshly spruced up property and the auctioneer would go to work … “Will someone give me $350 a week? … thank you … $350 a week, $360 up the back. $360 a week … it’s against you sir. $370. Thank you …” and on it would go until the market price was found.

It’s the purest way to find the market value, I guess. Of course, it’s not a nice thought for a family to have to drive from property to property getting steadily more desperate, and would mean some people who be taken advantage of for sure.

moneypenny26128:37 pm 28 Jun 10

According to both the Office of Regulatory Services (which monitors fair trading in the ACT) and the Tenants Union:

Residential properties ought to be advertised for rent at a fixed price (advertising includes verbal representations as well as written ones). If a property is advertised without a price, with prospective tenants asked to nominate a price, then this is rent bidding.

If landlords or real estate agents encourage rent bidding or auctions this could be a breach of the Trade Practices Act (depending on how it is conducted). In the case of agents, such conduct could breach their Code of Practice. This practice should be reported to the Office of Regulatory Services, or the Tenants Union.

In relation to the conduct of agents, the ORS has advised the RE industry that “… the agent must follow certain procedures to ensure they do not breach the Agents Act 2003 or any other legislation.”

For more specific info, see: http://www.ors.act.gov.au/ors/pdfs/Newsletters/ORS_E-News_07-April.pdf

Rent auctions (I’m looking at you Peter Blackshaw RE) are currently unregulated in the ACT. The current formal rules for auctions only apply to sales. This leaves prospective tenants rather exposed with no transparent or accountable process and potentially unethical conduct by auctioneers and landlords.

Be vigilant tenants. Don’t be sucked in by the hype. Although some rents may genuinely be open to negotiation, if you that the negotiating is a sham – report it.

Clown Killer7:54 pm 28 Jun 10

I would imagine that most decent property managers (if that’s not a tautology) would know the market well enough to be able to set rent. There would be the odd property with little or nothing to compare it with that might make placing it in the market difficult. I don’t see that there’s too much of a problem with negotiating a rent with a landlord – it’s pretty common in the commercial property market. As a prospective tenant you’d have to have a fair idea of what you can afford and what that will get you in the market … if the place looks way better than anything you’ve seen elsewhere in your price range then chances are it’s not in your price range … easy.

The rent auctions are a different creature altogether. The model proposed by some Canberra property managers was essentially based on the property sale model – a crowd of prospective tenants would gather on the front lawn of some freshly spruced up property and the auctioneer would go to work … “Will someone give me $350 a week? … thank you … $350 a week, $360 up the back. $360 a week … it’s against you sir. $370. Thank you …” and on it would go until the market price was found.

sexynotsmart7:23 pm 28 Jun 10

I thought it meant in exchange for services of an intimate nature. But hey, I guess it could mean the rate is negotiable.

“ACT Government is fully aware of the situation and has done nothing”

What do they say when these things are reported?

I’ve experienced a similar situation of reporting a bad pub housing tenant only to be told for ‘confidentiality’ reasons I would not know the outcome. The outcome was that absolutely nothing happened.

It makes you wonder about the mentality of these bureaucrats.. or can someone enlighten me as to what the obstacles are in investigating these people and actually penalising them.

It’s just part of the ACT Government’s systemic dysfunction around all aspects of houseing. e.g. Three adults from the same extended family (former partners and a sibling of one of them) are still occupying three houses, once each, 9 bedrooms, $1,800,000 worth of ACT Housing property in the inner suburbs … actually, one of them has lived interstate for the last three years and has been subletting illegally for that entire time. All are paying welfare rent rates (even though one of the three works fulltime and manages to continue to pay welfare rates by taking a week off work every six months when they have to fill in the form). Children all left home by two years ago. ACT Government is fully aware of the situation and has done nothing. These tenants graciously condescended to give up a two-bedroom flat they were illegally subletting, a hangover from a brief period when one of the aforementioned children decided they needed their own pad.

It is illegal in most states – but not here!!!! Strange isn’t it. Perhaps our leader would be kind enough to take a few boarders. After the next election, he may need the extra income.

stereo henry5:16 pm 28 Jun 10

Pretty sure that in every other state and territory this kind of activity is illegal. This is just another way the ACT fails to provide any protections for tenants and always favours the landlord.

Interesting that our dear leader, overlord-and-mayor-of-struggletown-prand-poo-bah Stanhope, wants 500,000 residents in the ACT – if they can’t afford to buy or rent where will they live?

I seem to recall that it was reported during the last rent panic that rental auctions were illegal, or at least in contravention of some rule or other. I could be wrong, though.

I have found that it can mean a lot of things. You may negotiate for a lower price on the rent in exchange for upkeep, or it may be that the rent is so incredibly high that they can’t fit the figures on the page.

merlin bodega4:49 pm 28 Jun 10

Easy. You just tell the landlord how much you earn each week and the real estate agent adds $10 to that.

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