NEWSLETTER ISSUE 8

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Is there a case for long-term tenancies?

One of the chief attractions of the residential property market to investors is the ease with which landlords can get their tenants out, writes Rosalind Renshaw.

That sounds hard-hearted. Nevertheless it is true: the creation of Assured Shorthold Tenancies undoubtedly grew the whole industry and encouraged new landlords into the market, knowing that they could easily and cheaply gain possession of their properties. Gone were the days when sitting tenants overstayed their welcome by years on end, paying under market rate to rent homes which landlords couldn’t, or wouldn’t, keep repaired and maintained.

It was a system that encouraged rogue landlords to use dirty tricks to harass their tenants into leaving and discouraged decent landlords because of the fear that they would never be able to get tenants to leave unless they embarked on the hassle of court action.

It blighted properties, many of which had to be sold with sitting tenants who didn’t look like moving out voluntarily and by law, couldn’t be moved on.

Today, landlords can serve a simple Section 21 notice on tenants: there doesn’t have to be any fault on either side, harassment has very largely ended and everyone understands the system. If there are abuses – and that’s a big if – it is that letting agents now routinely charge a renewal fee if the tenant stays on after the initial six months or year. 

Now that in itself is a confusing message. Are we actually saying landlords prefer longer-term tenants? Well of course – providing they keep the place tidy and pay the rent on time. Avoiding the void has become the modern landlord’s mantra and a solid reason to invest in bricks and mortar.

But being able to gain possession of remains key.

So, what are we to make of recent calls to offer long-term tenancies as a solution to housing now that we have arrived in credit crunch times? The thinking is that as more and more people voluntarily quit home ownership to move into rental accommodation, or fail to get on the housing ladder in the first place, they will want security of tenure.

In France, where mortgages have always been notoriously difficult to raise, renting is a way of life and initial three-year tenancy agreements are normal. They are often extended to nine-year terms. Tenants also take on the responsibility of upkeep.

In the UK, Mike Goddard prefers renting to home ownership. He doesn’t lack the money – he runs the highly successful Belvoir chain of letting agents – but argues that home ownership stores up inheritance tax problems. He and his wife Stephanie were perfectly happy renting a large country pile for eight years and during this time took on repairs and refurbishment, saying that they reaped the benefits in terms of their own lifestyle.

The Goddards only moved out when they were unable to negotiate a new ten-year lease, and are now rather reluctant home owners. Goddard says that in future, tenants and landlords should have the choice between Assured Shortholds and longer-term tenancies.

He says: “We need to recognise that renting can be a financially viable and sensible lifestyle choice. “The days when renting was viewed as a second-rate option are fast disappearing, as is the stigma of being a tenant. “We are now seeing the first stage in a fundamental shift in attitude by the British public toward home ownership and renting, but it is evident that more tenants want increased security of tenure in where they live.”

Although tenants would have more rights under long-term agreements, Goddard argues that they would also have to do the repairs and maintenance as a fundamental incentive to encourage landlords.

Others in the letting field believe that landlords would never like to commit to long-term tenancies at the outset, mainly because of the risks involved if circumstances changed, but also because it could prove difficult to adjust rent.

However, it would be interesting to know what landlords themselves think. Long-term security, no voids, the tenants taking over the repairs and steady rental income? Or would you rather take your chances with the odd void and carry on stumping up for maintenance costs, in return for the right to get the front door keys back?