New tenancy agreement needed
I hate the current threat of further regulation of the private rental sector including the prospect of rent controls. Most regulation of the private rental sector is badly thought out, counter productive & pointless. This is not to say I am against any regulation whatsoever. You only need look at laws that have banned drink driving and smoking in public places to see what a transformative effect ‘good’ legislation can have.
The Assured Shorthold Tenancy was good for landlords & tenants
The introduction of the Assured Shorthold Tenancy Agreement and it’s more restrictive brother, the Assured Tenancy was another example of excellent regulation and legislation.
It’s impact transformed the private rental market, bringing in investment and ending decades of decline and under investment, which had brought the private rented sector to below 10% of UK households. The legislation was hugely positive. We are now at a situation where approaching 20% of all households live in privately rented housing and the sector can be described as robust, with more choice, more investment and more interest in it than arguably any time since Margaret Thatcher introduced the Housing Act back in 1988.
Time to evolve a new type of tenancy agreement
However, it is clear the rental market has changed. It no longer comprises of students and short-term professional renters, looking to rent for a few years in their early twenties prior to buying their own property. Increasingly private rental housing is a persons home for the medium and long-term.
I’ve experienced this myself my own rental portfolio. When I first entered the Buy-to-let ‘game’ back in the early nineties; I found most of my young professional tenants would move on every 12-18 months, either with a new job or because they were buying their own property.
The creation of the original Assured Shorthold Tenancy (AST) was perfect for these more flexible tenants, but the UK has changed, and therefore the rental sector needs to evolve along with it.
Many of my current batch of tenants have been renting from me for over 5 years, some approaching ten. Amazing!
I have always liked working with my tenants to improve the condition of my rental properties where I can. It makes sense, it potentially increases the rent that I can charge and also ups the capital value should I ever decide to sell. It also means that tenants stay with me longer.
The existing AST tenancy agreement doesn’t really work for these longer-term tenants. It is very much centred on an ‘easy in easy out’ arrangement.
The Assured Tenancy on the other hand was meant for longer term occupation, but for most landlords it goes too far by granting security of tenure to the tenant and making it much more difficult for a landlord to gain vacant possession and ever sell up.
The Assured Tenancy also restricts what a tenant can do to modify and alter the rental property. For these reasons Assured Tenancies are rarely used by private landlords.
Commercial property leases
A commercial property lease allows a tenant a greater security of tenure and also greater rights over the property to make changes to the internal building including improvements to the property. This kind of power granted under the provisions of the Landlord & Tenant Act 1954 would be attractive to many longer term residential tenants who may want to install new bathrooms, kitchens carpets, redecorate and make their rental property home.
Half way house tenancy agreement
The challenge for law-makers, civil servants and politicians is to create a new tenancy agreement that can encapsulate the aspirations of longer-term tenants who want to create a home, whilst still protecting the interests of the landlords.
Surely, it must be possible to formulate a standard residential tenancy that would give a tenant the rights to improve the rental property and granting greater security of tenure whilst at the same time protecting the rights of a landlord to obtain possession at the end of the fixed term.
However, this arrangement would need to come at a cost to the tenant that where a fixed term tenancy of say 5 years was entered into they would also need to guarantee that rent would be paid to the landlord for the full period even if they decided to move out before the end of the fixed term contract. In the case of a commercial lease this can be done by a tenant assigning the lease to a new tenant prior to the end of the fixed term.
New model for the private rental industry
The challenge for the private rental industry is for the private rental market to differentiate, with some landlords thinking longer term about letting their properties, and to cede greater powers to their tenants.
In return, these tenants will need to accept that if they want a ‘home’ environment, they must be prepared to take on greater responsibility for the property and it’s maintenance.
All this needs to then be built into the financial infrastructure, so that landlords can borrow money for a rental property that isn’t just let using an Assured Shorthold Tenancy.
Changes to the private rental sector & a new tenancy agreement are needed
If changes are not forthcoming then the feelings of dissatisfaction within ‘generation rent’ will continue to grow and the forces calling for change will push for rent controls and a landlord licence. Changes that will not serve the long-term interest of either landlord or tenants.
It is time for a change, but let’s opt for evolution, not revolution. In the meantime you can still download a Free Tenancy Agreement on us.