RENTING IN LONDON - THE FOUNDATIONS

Renting in London is an obvious alternative to buying in the city, if you find yourself unsure about which part of London you want to buy and permanently settle in. Renting in the UK does come with it's own set of processes that you'll need to be "au fait" with to ensure you are on top of your next rental property move. So we figured that a little refresher of how the UK rental market works would be helpful. Let's look at some foundational concepts about renting in London.

Private Rental Sector

If you are looking to rent in London, you'll be entering the Private Rental Sector (PRS) market. This is a classification of housing in the UK and is comprised of a private property, owned by a landlord, and leased to a tenant. A landlord can be an individual or a company, and the tenant (you), would deal either directly with the landlord, or a management company or estate agent. The other two housing tenures in the UK are the owner occupation sector and the social rented sector.

Assured Shorthold Tenancy Agreement

As a tenant, you will most likely be presented with an Assured Shorthold Tenancy (AST) agreement. An AST is the most common type of tenancy agreement in the PRS market and is used when the entire property is being rented (as opposed to a room in a house for example), and the tenant is either one person, or a group of people who know each other well, like a family. Under the AST, those named on the lease are jointly and severally liable for the tenancy agreement. This means that they share the responsibility for the entire rent and any damaged caused through a breach of the agreement.

The tenancy agreement will typically cover:

  1. The names of all parties involved

  2. The rental price 

  3. How/when the rent is to be paid

  4. How/when the rent will be reviewed

  5. Information on the deposit and deposit protection

  6. Instances when the deposit can be deducted from

  7. The start and end dates of the tenancy

  8. Obligations for landlords and tenants

  9. Information on who's responsible for which bills

  10. Information on who's responsible for repairs

  11. Whether a tenant can sublet or have lodgers

  12. Rules regarding pets, smoking, etc

Deposits

Holding Deposits

Some landlords may request that a holding deposit is paid to take the property off the market and out of the view of other renters. Think of it like a type of "reservation fee". You should be aware that by legislation, holding deposits can only be a maximum of one week's rent. The landlord would have 15 days from receiving the deposit to make a go/no-go decision and inform you, as the potential tenant. If it is a go, you and the landlord should mutually agree if the holding deposit is to refunded or if any part will be retained. Sometimes the landlord may deem that the holding deposit becomes part payment of the security deposit.

Security Deposits

Once the lease is signed, a security deposit will have to be paid to the landlord. A security deposit covers things such as missed rent, or damaged items, and acts as a type of insurance to the landlord. By UK legislation, the security deposit is set as a maximum of 5 week's rent where the annual rent is below £50k, and at 6 week's rent for annual rent of £50k and above. The landlord must protect the security deposit with a government approved Tenancy Deposit Scheme (TDS) within 30 days of receiving it from you. If there are no disputes at the end of the tenancy, your landlord has 10 days to return your deposit from the date that you both agree on the amount to be returned.

Rent Increases

Generally your lease will include a clause which allows for a rent increase. How and when this is triggered will depend on your type of lease and any clause it contains. ASTs generally start as a fixed term contract (12 months, 18 month etc) and move into a periodic contract (rolling monthly contract) once the fixed term ends. If no rent clause is present, you can expect the landlord to give 6 months notice of a rent increase in a 12 month fixed term AST.

How much the rent may increase by is at the discretion of the landlord. Normally it would be expected for a landlord to increase the rents from anywhere from 3%-8%. Of course this would depend on and be dictated by on market conditions and the particular area of London where the property is located.