Government plans for compulsory 3-year tenancies

3-year tenancies:

The Government is launching a consultation on its controversial proposal to make residential tenancies in England subject to a three-year minimum term, with a six-month break clause.

Launched earlier this week, the consultation will seek “…views on longer minimum tenancies, which are used in other countries, as well as ideas on how to implement the model agreement.�

The Government’s free model tenancy agreement introduced in 2014 and updated February 2016 is designed for landlords and tenants entering into an assured shorthold tenancy (AST) of short, or voluntarily of extended lengths, and contains guidance on its use and clauses.

The Government says the model agreement is “…particularly relevant for use when the parties are entering into a longer term tenancy of 2 or more years. It, therefore, contains provisions relating to rent reviews and those which enable the landlord or the tenant to end the tenancy during the fixed term if their circumstances change.�

Progressive change or election reality?

The new Housing Secretary James Brokenshire has said:

“It is deeply unfair when renters are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract.

“Being able to call your rental property your home is vital to putting down roots and building stronger communities.�

Shadow housing secretary John Healey has said:

“This latest promise is meaningless if landlords can still force tenants out by hiking up the rent.�

He said Labour plans included controls on rents, an end to so-called no-fault evictions and protection against sub-standard properties.

The wording within the consultation document proposes that tenants will have to be offered a minimum three-year tenancy agreement, but tenants would be able to leave before the 3-year term is up. In other words landlords would be locked-in, but tenant would not be.

The consultation will look into the practical workings of such a change and what exemptions may be necessary to make it work best, for example, those tenants that are happy with a short, say six or 12 month let, students being a prime example.

Landlords against the move

However, the consultation on mandatory three-year tenancies has come up against objections from several quarters in the industry, with the National Landlords Association (NLA), representing thousands of its private landlord members, questioning its validity.

There is also a big question mark over mortgage lenders rules which usually specify short-term tenancies of 6 or 12 months only. It could entail many lenders having to change their rules.

Richard Lambert CEO of the National Landlords Association has said that it introduces a shift in the Government’s stance on this issue, from one of volunteering to offer longer tenancies, to a compulsory regime:

“In his speech to the Conservative Party conference last October, Sajid Javid [then minister responsible for housing] announced plans for a consultation on how to encourage longer tenancies. That’s been the tone of the discussion ever since – consultation and encouragement.

“Frankly, right now, I feel we’ve been misled, says Mr Lambert.

“This is supposed to be about meeting the needs of the consumer. NLA research with tenants finds consistently that around 40% of tenants want longer tenancies, but 40% do not. More than 50% consistently say that they are happy with the tenancy length they were offered, and 20% tell us that when they asked for a longer tenancy, they got it.

“We would accept that the flexibility of the current Assured Shorthold Tenancy isn’t used as effectively as it could be, and that we should be looking to find ways to ensure that tenants are offered the kind of tenancies they need at the time they need them.

“That means thinking about how to modernise a model devised 30 years ago, to take account of the changes in the people who are renting and the way they live their lives. How will that be achieved by moving to a more rigid system, more reminiscent of the regulated model the current system replaced?

“It’s like urging someone to update their 1980s brick-style mobile phone, but instead of giving them a smartphone, offering them a Bakelite dial phone plugged into the wall.

“This is a policy which the Conservatives derided when it was put forward by their opponents in the past two General Election campaigns.

“It’s hard not to see this as more of a political move aimed at the renter vote than a genuine effort to improve how the rented market works for all those involved,� Mr Lambert concluded.

Short Duration Consultation

As part of the consultation, which runs until 26 August 2018, ministers are seeking views from landlords, tenants and related organisations about the most effective ways to tackle obstacles to introducing longer tenancies.

If government proceeds with mandatory longer tenancies, primary legislation will follow. Following the results of the consultation, the government says it will consider next steps with legal professionals.

The title of this very short duration consultation, “Overcoming the barriers to longer tenancies in the private rented sector�, perhaps gives a clue to the fact that this could be something of a fait accompli exercise?

Landlords should make sure their views are heard in this important development.

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