More Government meddling on the horizon

Why the Government thinks its interventions in the UK lettings market will be any more successful than its Brexit negotiations is beyond me!  But apparently, it knows best, and will save the day for the many millions of voters who rent their home.

The latest proposal is to mandate 3-year tenancies so that tenants have greater security.  I should make clear up-front, I have nothing against longer tenancy terms, provided that tenants and landlords have equal ability to trigger termination clauses should their own situations change.  In the post-tenant-fee world, the fewer relets a landlord has to navigate the better.  It is at the point of relet that a landlord’s risk is highest, and it is likely to be the point at which applicants will be freer to change their minds loading cost and uncertainty onto the landlord.

Given this is my view, surely I should be supportive of the Government’s policy?  Well, no.  3-year assured shorthold tenancies (AST) can already be agreed.  Many landlords would jump at a tenant requesting a longer-term, and they are completely free to do so already.  Only where the landlord is uncertain about her/his plans for the property would it be seen negatively.  But, how often does a tenant ask for a 3-year term?  In my experience in my own letting agency, almost never.  Is that because they don’t know they could?  Or is it because they want to retain maximum flexibility?

It is current good practice when a tenant or a landlord requests a break clause, for that clause to be ‘mutual’ i.e. applying the legal practice of fairness and balance, it provides each contracting party the flexibility to terminate.  The only time that may not be the case relates to an agreement where the tenant pays rent in advance for several months and where there is a second payment date during the term of the contract e.g. 6-months advanced rent up-front and a further 6-months midway through the tenancy.  In that situation, it is possible that there would be a break clause that only applies to the landlord, protecting their position in the event that further rent was not paid.

The Government is proposing mandated 3-year terms for AST agreements, with break clauses that can be triggered ONLY by the tenant. That will discourage landlords from agreeing to partial advanced rent agreements as it will force them to rely on serving Section 8 notices on non-paying tenants to regain possession of their property – effectively removing the accelerated possession process currently available following the triggering of a termination clause and serving a Section 21 notice.

Many tenants rely on payment of advanced rent to secure a property, particularly where they are unable to pass credit and referencing procedures due to a lack of evidence of ability to afford the rent, or where they are unable to provide a suitable guarantor.

It is also a worrying precedent that the Government is advocating contractual terms which move away from the principle of mutuality, balance, and fairness. It appears that Landlords are less deserving of legal protection than their tenants - I can’t remember a time when a Conservative government was advocating such restrictive social policy, suggesting the centre-ground of UK politics is now firmly left of centre.

Should this misjudged policy be enacted, I believe it will have further consequences for the supply of good-quality rented homes.  Tying-up available rented homes for longer and reducing the absolute number of homes on the market, as good landlords feel that there are easier, less onerous ways for them to invest.  In the meantime, first and second-time buyers will still be excluded from the market by the massive deposits required to access mortgage funds.