3-Year Tenancies:

The consultation on what could be the biggest change in rental housing tenure in England since the introduction of the Assured Shorthold Tenancy (AS) in 1988 has now closed (yesterday, 26th August) and a decision could be just weeks away.

The landlord associations have been saying that in principle landlords would welcome a longer term tenancy. Most landlords want their residential tenants to stay as long as possible, and the average length of an AST is now around 4 years in any case, so no problem if tenants want to sign up.

Following Sajid Javid’s speech at the Conservative Party conference last October, landlords were led to believe that a longer tenancy would be introduced on a voluntary basis. That means it would be offered when a landlord was happy to offer it, and the tenant happy to take it.

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Since then the ground seems to have shifted, and in a big way. The Government is now suggesting a mandatory 3-year tenancy, but it would seem on unfavourable terms for landlords. After 6 months the landlord is locked-in for another 2.5 years but the tenant can walk away with a short notice. In addition, the landlord would no longer have a no fault eviction option, should things go wrong, but would have to rely on the expensive, slow and unpredictable Section 8 eviction process.

Industry professionals feel this would considerably increase letting risk for landlords and many industry experts think it could mean an even bigger exodus from buy-to-let than that following the increased landlord tax regime.

The NLA even go so far as to say they feel misled by government on the longer tenancy issue; they did not expect the seemingly rushed change of policy and a short consultation period for such a momentous change.

The NLA has said it strongly objects to a mandatory tenancy model along the lines proposed by government and here below is the outline of its submission to the Government’s consultation on “overcoming the barriers to longer tenancies”:

The NLA says its response outlines:

  • the increased risk associated with longer term tenancies for landlords, particularly with regard to removing tenants who breach the terms of their tenancy
  • the urgency of reforming court processes so that tenants can be removed where there is a breach of tenancy without undue delay or cost before any longer tenancies can be introduced
  • the importance of maintaining Section 21
  • the importance of flexibility in lengths of tenure, to account for the needs of different tenants and landlords
  • the risk that break clauses and regulated annual increases in rent will lead to landlords changing behaviour to end tenancies before they enter into the longer fixed period and enforce rent increases more regularly than under the current system
  • the value of using incentives to encourage behaviour change, rather than enforcing a mandatory approach, which will not be suitable for either landlords or tenants
  • the danger that, should a mandatory approach be enforced, landlords will choose to leave the market rather than take on additional risk.

The NLA says it has strongly opposed the Governments latest plans to introduce mandatory three year tenancies since they were announce earlier this year, and NLA Chief Executive Officer Richard Lambert has said:

“In his speech to the Conservative Party conference last October, Sajid Javid announced plans for a consultation on how to encourage longer tenancies. That’s been the tone of the discussion ever since – consultation and encouragement. Frankly, right now, I feel we’ve been misled.

“This is supposed to be about meeting the needs of the consumer. NLA research with tenants finds consistently that around 40% of tenants want longer tenancies, but 40% do not. More than 50% consistently say that they are happy with the tenancy length they were offered, and 20% tell us that when they asked for a longer tenancy, they got it.

“We would accept that the flexibility of the current Assured Shorthold Tenancy isn’t used as effectively as it could be, and that we should be looking to find ways to ensure that tenants are offered the kind of tenancies they need at the time they need them.

“That means thinking about how to modernise a model devised 30 years ago, to take account of the changes in the people who are renting and the way they live their lives. How will that be achieved by moving to a more rigid system, more reminiscent of the regulated model the current system replaced?

“It’s like urging someone to update their 1980s brick-style mobile phone, but instead of giving them a smartphone, offering them a Bakelite dial phone plugged into the wall.

“This is a policy which the Conservatives derided when it was put forward by their opponents in the past two General Election campaigns. It’s hard not to see this as more of a political move aimed at the renter vote than a genuine effort to improve how the rented market works for all those involved.”

©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.

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