NSW real estate agents use legal loophole to get more money for rentals after bidding was banned

Landlords have found a sneaky way around a ban on asking for quotes above an advertised rent – they can simply wait for potential tenants to make an offer.

The loophole still allows NSW brokers to get more money than the advertised offer as they are not breaking the law introduced last December.

The state government had tried to regulate the rental market and make it fairer for tenants by banning “rental auctions.”

A prospective tenant may still bid higher than the listing, as long as he or she is not urged by the landlord or real estate agent.

The loophole is being used by people desperate for a roof over their heads in the tightest rental market in more than a decade.

Rental vacancy rates in the greater Sydney area fell to 1.4 percent last month and queues of people queuing to view homes have doubled in length.

But even offering a premium over and above the advertised price is no guarantee of getting a lease – there’s always a chance someone else will offer even more, leading to auction-like terms.

One of those whose offers to pay more haven’t worked so far is Ryan Donachie, who viewed more than 20 properties around Bondi Beach in the past month.

He and his partner have been looking for something under $1,000 and have regularly found 20 people or more on viewings.

Despite offering to pay up to $25 a week above the asking price and being willing to prepay several weeks’ rent, they are still looking.

“I can imagine others doing the same, but there are so many applicants, it seems first come, first served,” he shared The Sydney Morning Herald.

Leo Patterson Ross of the Tenant’s Union of NSW said that while the new law has had some impact, the goal of capping the price has not been met.

“It really enshrines an auction-style approach to things, which is pretty alien to how we deal with other essential services,” he said, adding that allowing real estate agents to accept higher rental offers “taps into people’s desperation ‘.

In the two years to December 2022, advertised rents rose by an average of 9.6 percent in capital cities and 10.3 percent in regional areas, the Reserve Bank of Australia reported.

The NSW government’s Fair Trading Department has strengthened enforcement of the new laws by reviewing advertisements and sending staff to viewings who can issue on-the-spot fines to landlords who charge more than the advertised price.

A legal loophole allows NSW estate agents to get more money for a rental as they are not breaking a law introduced last December if someone makes the offer without being asked (stock image)

Fair Trading said it had looked at 12,000 online advertisements since the change in the law in December, and found that about 1,000 of them violated the law.

So far, despite the authority to do so, no fines have been handed out, but more than 300 officers have been given ‘educational letters’ about the law.

With primaries for next Saturday’s NSW state election already underway, opposition parties are using the state’s rent crisis as a potential voter.

Labor wants to ban secret hire bids, which would require increased offers to be disclosed to all applicants so they have a chance to match them.

The Greens want a total ban on rent bidding – meaning the advertised price must be the price charged – and also want an immediate rent freeze and rent controls in the state.

According to census figures, home ownership in Australia has fallen from 70 percent in 2006 to 67 percent in 2021.

The decline has been even more dramatic for young people. In 1971, 64 percent of 30 to 34-year-olds owned their own home, but in 2021 that will be only 50 percent.

For 50-54 year-olds, home ownership fell from 80 percent in 1996 to 72 percent in 2021.

What to do if your landlord tries to raise your rent?

1. Before accepting an increase, see how other rents compare in your area. If you think an increase is too high, ask if it can be reduced or negotiated. If not, you can look for something cheaper.

A for rent sign is depicted outside a house

2. Keep in mind that there are local laws that landlords must abide by if they raise your rent. If the proposed increase is inconsistent with your rental contract and local law, it may be invalid.

3. Always make agreements in writing, because that way you are insured in the event of ongoing disputes. If face-to-face conversations take place, always send an email to summarize what was said.

4. Decide if it’s worth paying extra rent or if you can save by moving. Keep in mind that there are often costs associated with a move, such as movers, cleaning costs and energy disconnection costs.