In a bid to solve the issues surrounding the UK’s “broken housing market”, the Government has been considering the option of introducing three-year tenancy agreements.
Originally suggested as a mandatory enforcement, this idea has received mixed responses, and there is now a call for it to be made optional, if brought in at all.
As well as longer tenancies, the Government wishes to provide tenants with the option to end their contracts at shorter notice.
With these proposals in mind, Mark Burns, managing director of property investment firm Hopwood House, has recently stated his three points that may give landlords a more positive outlook on the situation.
Firstly, he discusses how improvements to the process of removing tenants who have damaged the property, or may be in arrears, might make landlords feel easier about longer tenancies. Although many landlords are willing to be flexible in such situations, and provide tenants with time to resolve such issues, “there needs to be a feasible mechanism to allow for the prompt removal of problem tenants,” says Burns.
He also highlights how landlords might be happier with three-year agreements, if they had the opportunity to increase rents over the course of the tenancy. With there being no certainty that the Government won’t make changes that will result in more costs for landlords, like the reduction in mortgage tax relief, it may be that landlords will need to raise rent prices at some point during the tenancy.
In such a case, the Government will have to make the increasing of rents over the three-year period more practical. Otherwise landlords may end up either opting for other methods, such as fixed-rate mortgages, in an attempt to stabilise their own costs, or front-loading rents, in anticipation of future changes. Burns believes that assistance from the Government “is necessary for the wellbeing of tenants, as well as landlords.”
Finally, he mentions that for landlords to make such a long-term business commitment, the Government might consider responding in turn by making more changes to financially aid professionals in the private rental sector (PRS). The introduction of a meaningful benefit and the reduction of the current tax burden on landlords would be “very welcome”, Burns states. He concludes that, otherwise, “landlords will feel obliged to raise rents, in order to counterbalance the limitations put on them.”