Flash the cash – a note of caution on upfront rental payments.
It used to be home buyers in Central London that bemoaned the cash power of the global elite – making offers on properties they coveted, bandying about sums way above the asking price and paying in cash. And who could blame the vendors for preferring the outright buyer who could move quickly over those trying to purchase with a mortgage?
But the coin has flipped and it is now the prime Central London rental market that is being stunned by the financial audacity of the super rich. Wealthy tenants offering to pay six months to a year’s worth of rent up front are taking over the capital and letting agent E J Harris has crunched the numbers to reveal that £100 million in rent has been paid upfront by wealthy tenants to landlords since the beginning of January 2015. It claims in a normal year just one in ten tenants would pay rent in advance. That figure has now climbed to one in five. Why?
There are a number of trains of thought. Competition is one. The appetite for luxury rental property in London is voracious, being fed by the prospect of a post-election mansion tax. Flashing the cash is a quick way of trumping rival tenants as the scramble intensifies. There’s also the stamp duty reform that has made buying a home cheaper for 98% of people. But if you’re buying in prime Central London, you’re most likely to be in the 2% who now find their stamp duty bill has increased. Why give that money to the British government when you can rent and use the surplus to buy another super car?
But, alarmingly, the industry sights the ‘under the radar’ aspect of paying upfront with cash as a growing trend. When rent is covered for a year or so in advance, the tenant can stay anonymous and forgo the credit checks and references. Stop!
Really? Would you want to waive your right to knowing a tenant’s background just because they have £50,000 in notes burning a hole in their pocket? Does that not ring alarm bells? Okay, so you might not be able to pursue a employer’s reference is a Sultan or oligarch pops into the office with a brown envelope but a degree of fact finding, chasing up and maybe some Googling should be a matter of course, despite who the tenants is.
* Simon Duce is the Managing Director of ARPM Outsourced Lettings Support