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Longer contracts could drive yet more buy-to-let landlords out of the PRS

Small scale buy-to-let investors and accidental landlords face more upheaval under the government’s plan to introduce mandatory minimum three-year tenancies, according to a leading letting agent.

Aside from the fact that three-year tenancies, as proposed by the government, could make it harder for buy-to-let landlords to finance their property purchases, Fiona Bourke, partner at Carter Jonas, argues that longer tenancies will pile pressure on in many other ways.

The idea behind the plan is to offer private tenants greater security and enable them to put down roots. But Bourke believes that the risks may “far outweigh the benefit of financial security for the smaller scale buy-to-let investors and accidental landlords”.

She said: “With more rights being given to tenants, the three-year term potentially has less value to the landlord should tenants decide to leave part way through their tenancy, which they will have the freedom to do.

“Should landlords potentially come across problematic tenants it will also become harder for landlords to manage them if they are locked into a longer-term agreement.”

Bourke continued: “In my area of Wandsworth [in south London], rental agreements are often much shorter than the national four-year average and we have a significant number of local, individual and accidental landlords who may reconsider their options in light of these changes in legislation.

“Furthermore, such reconsideration could be fuelled further by the prospect of rent rise caps in future.”

Bourke says that there is “no easy way out for local, individual or accidental landlords as a result of these new changes”, but rather a choice between “going longer term on their investments or simply cashing in”.

But while some smaller scale landlords may struggle to cope with the planned changes to rental legislation in this country, which she points out is “shifting further towards alignment with Europe”, where three-year minimum tenancies have long been the norm, the proposals are sure to be a welcome one for larger scale investors.

“Venture capitalists and asset management companies will be buying up property with the ever so slightly more safeguarded guarantee of a long-term return on investment,” she added.

“It [the planned new rules] could bring about a new buy-to-let audience who recognise that we’re fast becoming more of a rental society and the new laws may give landlords more stability in the long run.”

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    i like long term tenants, only problem i can see is that it will take longer to evict bad tenants, we will have to be more fussy as to who we rent to and insist on good guarantors.

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    If I was as fussy as I think I should be I would be promptly locked up.

    Have you found a way that is legal? I would love to know.

     
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    fred, they are my properties i will choose who i rent to, nothing illegal in that.

     
  • Rent Rebel

    "Bourke says that there is “no easy way out for local, individual or accidental landlords as a result of these new changes”, but rather a choice between “going longer term on their investments or simply cashing in”.

    No use of section 21 in the fixed term. But landlords could sell (new ground) or move (back) in (amended Ground 1). Apparently landlords never misuse a section 21, so what's the issue.

  • Peter David

    The intrinsic additional risk that this puts on landlords will manifest in further upward pressure on rents as many landlords quit the sector. I'm beginning to see that the government's on going attempts to make the world a fairer place are going to allow me an even richer retirement. Keep these anti landlord edicts coming, my wife wants a new Mercedes.

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    Tenants can stay as long as they want to by paying their rent on time and respecting the property and neighbours.
    Why would a Landlord want to evict a good Tenant? (except to sell.)

    As an owner occupier see how much security you have if you stop paying your mortgage!

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    If a tenant mis-serves a break notice (as per the 6-month suggested break clause), then legally the tenancy continues. But if that tenant intended to move out at the six month mark and already has somewhere lined up, they're going to leave anyway. You could say that the LL won't be all that bothered and will just re-rent the (now vacant) property -not least of all because if the tenant has left to live elsewhere, they're hardly likely to be able to continuing paying rent and council tax for a house they now longer reside in for a further 2.5 years- but legally the original tenant still has tenure. This means that a situation created purely by the tenant (the incorrect service of a break clause) can lead to a LL both not receiving any rent, but also not (very easily) being able to recover their property!

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