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Three-Year Tenancies - Would They Make Any Real Difference?

Property Technology Blog

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The government’s plans to introduce three-year tenancy durations haven’t been met with overwhelming positivity throughout the private rented sector, but is there any evidence that they would make an actual difference to the way things currently work?

Proposed in a consultation paper by the housing, communities and local government secretary, James Brokenshire, the longer tenancies are designed to stop landlords forcing out tenants at short notice without having to provide them with an explanation. Tenants would still be able to leave before the end of the minimum term, as they currently are, but would have greater protection if they wanted to stay in a property for an extended period of time.

The effect on tenants

The paper states that a tenant would still be able to leave a property before the end of the minimum term, but currently, if a tenant wants to leave early, they can do so as long as they give six months' notice (i.e. enough time for a landlord to re-let).

There is also, supposedly, a benefit for tenants in terms of the policy providing them with greater protection if they wanted to stay in a property for an extended period of time. However, this feels like a cheap benefit - if a tenant is complying with their tenancy obligations (including paying rent) and the landlord doesn’t want to sell or live in the property themselves, why would that landlord want a proven good tenant to leave?

The effect on the industry

The six-month and one-year contracts gave lenders in the buy-to-let industry the confidence to grant mortgages against properties where they knew they could repossess the property at short notice if necessary. But a three-year term is likely to make lenders wary about granting loans, or they may increase the interest rate to reflect the additional risk.

Around 80% of the tenancies in England and Wales are set at six or 12 months, but there have been accusations of the government introducing this policy as a vote-grabbing political move that won’t make any real difference to the current situation - all it really does is highlight that the government now sees renters as a key source of votes and wants to pander to them.

Are there better ideas out there?

What could really make a difference? Increased repairs and maintenance standards? Why not? It's someone's home and they are paying for a service: the exclusive occupation of a safe property. Clear obligations and proper enforcement would level the playing field between landlords and agents who act professionally and those that don't.

Additionally, is there a place for built-in rent increases (which 68% of landlords, according to Shelter, have previously failed to implement as they wanted to keep the tenant in place/not rock the boat) here? These would provide yield protection for landlords and long-term cost certainty for tenants, who would be informed well in advance about increases and able to choose to leave if they wished to.

Whether the three-year tenancy plan comes to fruition or not (it’s by no means certain who will be in government in the coming months, let alone in the coming years), this isn’t an issue which is likely to be shelved, as Labour politicians had suggested similar measures before this Conservative plan was tabled. However, over the course of the consultation, changes may be made and it’s likely that, if and when the plan comes to fruition, it will look different - whether tenants and landlords will be happy with the result remains to be seen.

Ben Gallizzi

Written by: Ben Gallizzi

Ben is the Content and Social Media Manager for Fixflo.

landlords | tenants | government | legislation

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