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Understanding the proposed three-year tenancies

Wednesday 10 October 2018

By Carl Agar

For me this is a very interesting topic that is dividing the landlord community. I believe the general consensus from the landlord community is that this is just another attempt to galvanise the tenant vote

What makes this interesting though is that for the first time in a long time, lots of tenants and landlords are in agreement.

So, what is the proposal

  • The agreement will have a three year fixed term with a six-month break clause fo both the landlord and tenant.
  • The landlord woulds till need to give the tenant two months notice if they wanted to excersise the six-month break clause by using the traditional section 21 notice approach.
  • After the initial six-month period landlords will only be able to repossess the property if either they intend to sell the property or the tenant is in breach of the agreement and a qualifying section 8 notice can be served. This essentially covers most breaches including non-payment of rent).
  • Once the initial six months have lapsed it is proposed the tenant can actually terminate at any time by giving the landlord three months notice.
  • Rent can be increased once per year at a rate agreed by the landlord and tenant at the outset of the tenancy.
  • At the end of the fixed term, a landlord is able evict a tenant in accordance with section 21 of the Housing Act 1988, by giving the tenant two months notice in the form of a section 21 notice.

The government’s justification for this proposal is that they are trying to protect tenants, who may be forced to leave their homes at short notice and give them some security of tenure.

This has been met with a mixed response but is supported by organisations such as Shelter - who look to protect the interests of tenants. According to Shelter losing a tenancy is the main contributor to homelessness. More and more people are having children and growing old in their rental properties, and they need the security and peace of mind that they can stay longer. They believe that longer term tenants will provide landlords with more stable tenancies and tenants will take better care of the properties they live in as it’s more likely to feel like their home!

In contrast the National Landlord Association (NLA) have taken a completely different view, implying that this is nothing more than a vote catcher and that less than 40% of tenants would welcome longer term contracts.

On a positive note for landlord it is suggested that this approach will have an unintended outcome of increased rent. Why? Well outside of London and the South East most landlords are very wary of increasing rents, by the looks of this proposal it appears that rent increase could well become an annual event.

At this stage my conclusion is quite simple, whether or not the three-year tenancy is a good idea, will really depend on the final proposed conditions. What is clear to me though is that until the government can recognise that we now have a very diverse and complex private rental sector, we are consistently going to get policies and legislation that positively impacts part of the market and negatively impacts the rest.

Housing is an emotive issue and we need to recognise that housing needs for tenants in this country vary greatly - and so does the way they wish to occupy properties.

One size fits all will in reality fit very few – landlords OR tenants.

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Article by:

Carl Agar

Carl Agar

Carl Agar is the managing Director of Big Red House letting agents, founder and Chief Executive of The Home Safe Scheme, has been the Yorkshire representative of the National Landlords Association for the last decade - the UK’s largest landlord association, as well as being a Landlord and Investor.