Longer Residential Tenancies

The Government has recently begun discussing the possibility of tenants in the private rented sector being able to request longer tenancies to provide stability for their family, avoid hidden fees when renting a home and demand a fair deal from their landlords and letting agents. New measures aim to encourage longer fixed-term, family-friendly tenancies and raise standards in the private rented sector.

The Government has introduced a policy goal of reducing the demand from families for social housing. Across the country a divide has developed so that families with dependent children gravitate towards social housing because they meet the criteria for allocation, while the private and rented sector more heavily favours single people and childless couples. The government’s objective is to provide longer periods of stable housing for families with children, thereby meeting a perceived reluctance on the part of families to take up private sector tenancies.

Most assured shorthold tenancies are currently granted for terms of six months or a year. The reason for this is that a longer fixed term ties both parties. The landlord would not be able to recover possession unless the tenant breached the tenancy, which may not suit landlords who prefer the flexibility of being able to sell with vacant possession at relatively short notice. For the tenant it means a commitment to pay rent for the whole term, whether they move out or not. While this gives stability, the inflexibility may not suit tenants who for example, may lose employment and be unable to pay the rent, undergo relationship breakdown, or require a larger property if their families increase in size.

Addressing these issues, the government has said that its longer-term tenancies will include break clauses, allowing either side to end them, and rent review clauses. However, as the situation currently stands, if a short fixed-term tenancy expires and both parties want the arrangement to continue, they need do nothing—a statutory tenancy arises on the expiry of the fixed term, and occupation can simply continue on the same terms. So the question can be asked - how does a longer-term tenancy improve on the present situation?

Additionally, mortgage lenders may play a serious role in this development. Most mortgages generally contain terms about the letting of the mortgaged property and normally letting prohibited without the lender’s consent.  It seems fairly certain that the lender’s concern about the government’s proposals will mirror that of landlords—a longer fixed term may not be convenient if the borrower defaults on the mortgage, as it will hamper the lender from recovering the property with vacant possession.  So the concern is that mortgage lenders simply refuse to allow the property owner to enter long lets, thereby prejudicing the government’s objective.

 

Oliver Kew

Published on 02/01/2014

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