Do landlords want longer term tenancies?

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Blog post by Mark Brockhurst, National Landlords Association

There has been a bit of campaigning, here and there over the issue of longer tenancies. It has been publicised that tenants want longer tenancies but feel they aren’t being offered them.

From the discussions, here are some of the issues (not exhaustive);

  • The desire for longer tenancies
  • Accusations of agents using short tenancies as an excuse to charge renewal fees
  • Landlords using the renewal as a reason to raise rents
  • Concerns over Eviction

Here is some current data in support of those claims – or in defence of others –  good and bad;

  • The average tenancy in the UK is 17 to 18 months (as of Homelets Report Apr17) The latest Homelets Rental Index has dropped 0.3% – meaning rents are dropping – albeit by a small amount
  • Letting Agent Fees are in line to be banned
  • There are some rules around rent increases. They can be found here on the Gov.uk website

While the above info can be viewed to mean any one of a dozen things, I can offer some insight on the understanding of Landlords and their views on longer tenancies. I make some other points in passing but I will try not to drift too far away from the core concerns of longer tenancies. Let’s take all the issues from my opening paragraph and try to say something useful for each.

Do Landlords Want Longer Tenancy Agreements?

Mostly, Landlords are in favour of longer tenancies. One thing that does not ‘pay the mortgage’ is an empty property and to risk one or two changeovers inside a year will impact the viability of that property significantly for that year.

Most Landlords have a mortgage and the property is viewed as an investment (as a pension pot, for example) or business. When a property is empty, the mortgage obviously still needs to be paid. It’s a myth that the rent you pay is somehow going completely into your landlord’s pocket to be spent on speed-boats and the like. Even if they don’t have a mortgage, there are many things that a Landlord might need to pay inside that year including (to name but a few) mortgages, insurances, taxes, licensing fees, repair costs, energy performance certificates, gas safety certificates, advertising costs, administrative costs, letting agent costs, service charge fees and ground rent fees.

The rules that most landlords abide by, makes property a good business to be in – over time. Perhaps, 20 years. No one becomes a property millionaire overnight – despite what the papers or the ‘get-rich-quick brigade’ might say. In fact, the majority never do. You are statistically unlikely to ever rent a home from a millionaire.

At the end of a tenancy – because of moving arrangements, cleaning and repairs, paperwork and the new tenants who need to provide notice on a previous tenancy, you can expect a property to be empty for just under one month each time a tenancy changes over.

But a short tenancy in the first instance might seem practical from certain perspectives. It gives each party a chance to get to know each other and call it a day after a short period if it is not a good fit for everyone. This can go either way, and of course, if you are sharing a property, your reasons for wanting an end to a tenancy may have more to do with your housemates than the property itself.

The End Of Lettings Fees

Letting agent fees are to be banned. At the time of writing, this will mean no fees for ‘setting up a tenancy’. This will end any instances of renewal fees. Other fees may still be allowed if the agent needs to perform some task for you during the tenancy and it’s clear the service is for you, not the Landlord (i.e replacing lost keys).

Rent Increases

Increase in remuneration (in this case, rent) during the term of a contract is commonplace. An increase (no matter what business, be it rent or mobile phone charges) in line with inflation is to be expected. This is not an especially wide practice as current tenancy terms tend to be short enough to mitigate the need but they might be more commonplace if 3 year tenancies are offered. They will either be linked to inflation (fairer but can be more difficult to understand) or a fixed amount each year of the tenancy.

What is Eviction?

The threat of eviction also seems to be high on the list of tenant concerns and dovetails into the wishes for longer tenancies. It’s important to understand Eviction is a term to describe a process to begin the end of a tenancy but it does not necessarily mean the tenant has done anything wrong.

The first instances of the Assured Shorthold Tenancies we all use today made an appearance in The Housing Act 1988. What suited the purposes of the country then of course, may not suit it now.

There is a legal process to ending a tenancy (since it’s a contract, the same as most others) and the dreaded ‘Section 21’ Notice is a legal document that the Landlord must serve to notify all concerned that they wish to bring an end to the tenancy. There are no public records held by the government of these Notices (assuming the matter never goes to a court room) and It might be appropriate to use one even if both parties agreed an end-date, just to make sure it’s documented in the agreed legal format.

Eviction in the face of damage or arrears is something else. As is retaliatory eviction. These things must be proven but I think it can be agreed that it is more likely that other reasons would be the cause for a tenancy to end.

Longer tenancies are likely to be a fixture of the future landscape and many on both sides will welcome them. As with all things, I hope a balance is struck between need and practicality.

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