Caixin
Sep 05, 2020 04:24 AM
FINANCE

Chinese Authorities Warn Renters and Landlords of Leasing Platform Risks

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What’s new: Housing authorities in several Chinese cities told renters and landlords to be wary of “abnormal rental prices” offered by long-term rental businesses after a number of apartment rental operators absconded with tenants’ money.

The Housing Rental Association and Real Estate Agent Association of Hefei, the capital of central China’s Anhui province, issued a notice Thursday reminding landlords and tenants to be vigilant about leasing at prices significantly out of line with market levels. Shanghai, Guangzhou, Haikou and Chengdu recently issued similar warnings.

In recent months, several long-term apartment rental operators collapsed and their bosses vanished with tenants’ rents and deposits.

The background: Apartment rental companies sign long-term leases of usually 5–6 years with landlords, renovate the apartments and then sublet them to tenants. These platforms’ profits are supposed to come from premiums they charge tenants. But to quickly attract tenants and landlords, many Chinese apartment rental platforms have been offering higher rents to landlords than they collect from tenants.

The platforms usually require tenants to pay one year of rent in advance while they pay the landlords in quarterly installments. When tenants, mostly young people fresh out of college, can’t pay a year of rent in advance, these platforms form partnerships with financial institutions to offer rent loans to tenants.

In January, Q&K International Group, China’s first long-term apartment rental platform to be listed on Nasdaq, asked landlords to lower rents as the company faced mounting losses.

Another Nasdaq-listed long-term apartment rental platform, Danke Apartment, also faced a backlash from landlords after the company demanded that they reduce rates or offer a waiver of one month’s rent, citing the Covid-19 pandemic postponing the return of tenants.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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