Understanding Rent Bidding

Rental bidding has gained a lot of attention in the Australian rental market in 2023 due to some of the lowest vacancy rates on record. In an effort to protect tenants and promote fair and transparent rental processes, NSW implemented a ban on rental bidding. But what exactly is it, how does it work and what are the laws around it?

What is Rent Bidding?

With vacancy rates at an all-time low, rent bidding has become a popular way to secure a property in Australia. The term 'Rent bidding' describes the practice of where tenants offer higher amounts of rent than the advertised price to be accepted for a property. This can benefit landlords and property owners who can charge more but could also put some tenants at risk of being taken advantage of.

Rent bidding creates a highly competitive environment for tenants, forcing them to offer higher rents than they can afford. This can lead to financial strain and reduced affordability, particularly for low-income tenants. Additionally, the bidding process favours tenants with more financial resources.

The practice is seen as controversial and is mostly prohibited as it can distort the rental market by increasing rental prices. Property owners or agents may be incentivised to set lower advertised rents to attract more bidders, expecting the final price to surpass the initial offer. This inflationary effect can contribute to housing affordability challenges and make it more difficult for tenants to secure suitable rental accommodation.

Who's behind Rent Bidding?

Contrary to what many might think, the main drivers of rental bidding aren't primarily landlords or agents (although we know there are still a few shady practices happening around the industry). Surprisingly, it's often renters themselves who are taking the lead and using this strategy.

In certain cities where vacancy rates have plummeted to less than 2%, tenants who are desperate to find a home are ready to go to some lengths to secure one. With the crazy competition, renters have found themselves willing to go above and beyond the quoted price, all to ensure they can finally put an end to the stress of hunting for a place.

Rent Bidding Rules

Rent bidding is prohibited in NSW. Anyone including a real estate agent, assistant real estate agent, landlord or digital rental application provider, cannot solicit or invite an offer of rent that is higher than the advertised price for a residential rental property. A landlord or agent must also include a fixed price on advertisements for residential rental properties. They can no longer be advertised within a price range, or with text such as 'offers from' or 'by negotiation'.

You can visit the NSW Fair Trading official website for more information.

Navigating Offers as a Property Owner

Understanding the rules and regulations governing rental bidding is essential for you and your prospective tenants. After all, everyone wants to ensure they're playing by the rules! Here are a few tips for navigating the applications process and offers from prospective tenants:

✅ Familiarise yourself with the rules

Familiarise yourself with the rental bidding laws and regulations specific to your state. Each state in Australia may have different guidelines or restrictions regarding rental bidding. Refer to the official websites of your state's governing body for comprehensive information on rental bidding laws.

✅ List a realistic rental price

Set a realistic rental price to help ensure the process is fair for everyone involved.

✅ Be fair and transparent

It is important to remain fair and transparent throughout the application process. Be honest with prospective tenants about what you are looking for in a tenant and why.

✅ Ensure the tenant can pay the rent they offer

It is important to verify that the tenant can pay the rent they offer. Ensure that tenants provide proof of their financials before renting the property. This will help ensure you get a reliable tenant who can pay their rent on time.

✅ Create a written agreement with successful tenants

Finally, you should create a written agreement with successful applicants to ensure the rent is clearly agreed to. This document should contain all the details of the rental agreement and any clear rules you have set regarding the bid parameters. A contract ensures that both parties are aware of their rights and obligations.

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Originally published on https://rentbetter.com.au/article/understanding-rent-bidding

Posted on Tuesday, 31 October 2023 by Amanda Siradjuddin