Why do estate agents say calendar month?

Hawk & Chadwick

 

Alasdair Gravestock Du Melville - Director

Alasdair Gravestock Du Melville – Director

So you’ve been killing time on the train, at home or at work idly flicking through property listings and you noticed on the Lettings pages a little string of letters after every price “pcm” – Why do estate agents say pcm? what the hell is pcm? What does it mean?! Please Call Me? Party of Moldovan Communists? Pie Chart Master? Panda Chase Mandatory? Clearly, the possibilities are endless, but please allow me to put you out of your misery and explain the answer to the question;

 

Why do estate agents say calendar month?

Calendar month or “per calendar month” abbreviated to “PCM” on property listings  is something we see all the time, but why? And why is it this instead of saying “Per Month”?

Well, the main reason is because when you rent a property you enter into a legally binding contract with the Landlord which is governed by several important pieces of legislation. These have been put in place by successive governments over the last 93 years (yes, really!). These laws are in place as an attempt to make sure that Landlords and tenants

treat each other fairly and equitably, along with a whole load of other things.

 

It’s all about contracts

One of the basic elements of a contract in property law is this;

in order for a tenancy contract to exist, three elements need to be present;

1 – Exclusive Posession
2 – Fixed period of time
3 – Consideration

this differs from basic contract law which only requires Offer, Acceptance and Payment for a contract to be legally binding. Specific property contracts require a more stringent set of cirumstances. Breaking it down very simply, those are the three recipe ingredients to make the AST (Assured Shorthold Tenancy) cake. An Assured Shorthold Tenancy is the most commonly used rental contract in England and Wales today. It differs from a Lease, a License, and an Assured Tenancy or Rent Act 1977 Tenancy but……whatever, you don’t want to know about those anyway (do you?!).

In order for an AST to exist, the tenant must be given the right to exclude all others (including the landlord and his agent!) from the property. The contract must state a defined fixed period of time (this would be your 6 or 12 months, etc), and there must be some form of ‘consideration’. In legalese, consideration means payment – and payment can be monetary, or it could be a watch or a rolls royce if you like. There just needs to be a transfer of something of value from one party to the other.

Without those elements, you don’t have an AST. Not having an AST is another story entirely and to be honest I won’t go into it now. It’s very complicated and we’ll be here all bloody day – besides, you want to know the answer to your question – Why do estate agents say calendar month?

Onward dear reader!

 

Alright, alright, stop sandbagging …  Why do estate agents say calendar month?

Looping that all back to the original point of why estate agents say calendar month, agents and landlords are bound by strict rules on what we can and cannot say. Under modern Consumer Protection legislation we have to be clear and upfront about everything. That includes the cost of tenancies and any fees relating to them. Nearly all up front fees charged by Landlords and Letting Agents will shortly be banned, but again, more on that another time. It’s a rabbit hole that even the House Of Commons is finding relatively brain melting right now. The legislation is currently being debated and should be live by April 2019.

As a consumer, you have the right to know exactly what you’re paying for upfront. You might think that the government wouldn’t have to legislate for that as it would be an obvious thing to expect agents and landlords to do. Believe it or not, the problems with this NOT happening have been so bad that the government had to step in and knock some heads together. So why do estate agents say calendar month? It is the figure that is telling you what you will have to pay in rent in order to live in the property. But why don’t we just say “Per Month” – they mean the same thing, surely?

Ay, there’s the rub; “per month” and “per calendar month” usually mean the same thing, but not always. A month could be interpreted to mean a set unchanging period, i.e. from 21 March to 21 April, and then the next month after that would mean from 21 April to 21 May. A “calendar month” always means March, April, May, etc, which is why we use it for rentals because we are working to a fixed term contract of a set number of months. This is done as opposed to a set number of periods. Remember that months are all different lengths in terms of days (February only has 28 days, for example) which can cause problems if rental dues do no match up with the wage payments of the tenants, or the mortgage payments of the landlord (if any).

 

A common misconception about rental pricing

As a sort of footnote to follow on from the original question of ‘Why do estate agents say calendar month?’ I want to just touch on the displayed price of rental property. It is often that I have seen people on social media and in comments sections on YouTube or popular press websites stating that Landlords and Letting agents are setting prices high. It’s easy to fall into the belief that we are rubbing our fat greedy little mitts together while we collect reams of cash from struggling tenants. As appealing as the idea of demonising those involved on that side of the fence may be, the reality is far more simple.

The market dictates what we price property at – whether that property is for Sale or to Let, the same principle applies. You see, “The market” being literally the abstract idea of a body of people who are picking up what we’re laying down. If you imagine a microcosm of yourself being an Apple farmer – you grow your apples all year, and at harvest time you go pluck them from the apple trees, and you put them into boxes and head to market hoping to make enough money this season. You set out your stall and say hello to the other market traders, and you know you are the only Apple vendor in town – happy days!  The people in your town have some strange addiction to Apples and so you sell flipping tonnes of them for more than you expected – life is good, you’ve made more than you thought on your apples today! You dine like Kings and Queens and go to bed satsified.

The next day, you rise early and go back to market to sell more of your delightful Apples – you ran out yesterday and the queues were huge. You get to the market and your friend says “hey, have you seen the new Apple stall?” so you go and look – Some beach! – they’re selling Apples just like yours for 10p less.  You go back to your stall, convinced your apples are better because you polished them and left a leaf on the stork to show it’s all natural….but you’re distinctly less busy, and you see people with bags of apples….crap!  you’re not selling your apples!  What do you do?  You have to drop your price by at least 8p – 12p in order to compete.

Over the next few days, some days there are lots more Apple sellers (so everyone charges less) and some days there are very few, but people still need apples so they are willing to pay you more to get them. Some days, nobody wants any apples at all even though there are loads available, so you have to knock the price way down just to sell what you’ve got.

Alright alright, Ok, I know you get it I won’t keep bleating on about supply and demand economics, but this is exactly the mechanism that governs property – think about it in context;

The point is that the price is entirely dictated by what somebody is likely to pay for that commodity. In this case, the exclusive right to live in a property in a particular location. It may feel like the prices are arbitrarily set by agents and landlords. To an extent, that is true because for the most part letting agents are the ones who assess and determine the value. This is entirely led by data from recent lets nearby and their own market knowledge. We can tell when something is generating interest and when it’s not because we’re watching the activity around us every day. The problem is most acute, however, when in very wealthy areas the rental price is effectively set by those who have the funds to pay the prices. It is also set by demand for particular types of property.

This is why house prices are so high, and why rents are also high. Those with the means to do so compete for the properties in an area and effectively set the price, which is often sadly out of reach for those who may have lower incomes.

Hopefully that answers your question – Why do estate agents say calendar month? – and if you have any more questions, get in touch with us!

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First posted June, 2018