Three Year Tenancies and how it will affect landlords

The government have just finished a consultation on a controversial proposal to make residential tenancies in England subject to a three-year minimum term. Although the proposal does include a six-month break clause it hasn’t gone down well with many landlords. The government’s view is to seek longer minimum tenancies similar to other countries in Europe.

A consultation paper which has recently been published would stop landlords forcing tenants out at short notice. Currently, around 80% of tenancies in England and Wales are set at 6 or 12 months. For most landlords this assured shorthold tenancy is the bedrock of the buy-to-let industry.

The government’s three-year minimum tenancy proposal would allow tenants to walk away earlier if they wish. Needless to say, landlords are not too happy with the three-year tenancy plan especially when current contracts leave tenants at risk of eviction at short notice. Currently, landlords don’t have to give an explanation when evicting their tenants at short notice.

This three-year minimum tenancy model agreement is relevant when parties are entering into a longer tenancy of two to three years. On the plus side for landlords, the agreement does contain provisions relating to rent reviews. This will enable the landlord or the tenant to end the tenancy during the fixed term period if their circumstances change.

Consultation on mandatory three-year tenancies have come up against strong objections from many within the landlord industry, namely the National Landlord’s Association (NLA). NLA represents thousands of private landlord members, the vast majority of whom question the three-year minimum tenancy validity.

There is also a big question mark over mortgage lender’s rules which generally specify short-term tenancies of 6 or 12 months only. The new proposal could cause many lenders to change their rules to incorporate new legal implications. From the National Landlord’s Association’s point of view, the shift in government policy has been forced upon them and not discussed as promised by the then Minister responsible for housing, Sajid Javid.

Landlords feel that from being willing to offer longer tenancies, there is now a compulsory regime in place. Recent statistics have shown that around 40% of tenants want longer tenancies, but 40% do not. More than 50% say they are quite happy with the tenancy length they were offered and only around 20% have shown interest in longer tenancies.