A range of mortgage brokers are reporting an increase in enquiries from private tenants who have been given first refusal to buy the homes they are renting.

They report that tenants are being made the offer on the basis of landlords wanting to sell because of a cocktail of stricter energy efficiency requirements in the pipeline, higher interest rates, and concerns over the cost of living crisis.

Lewis Shaw, founder of Shaw Financial Services says: “Over the past six to eight weeks, we’ve seen an enormous uptick in enquires from tenants who have been given first refusal to buy the property they’re renting from their landlord, often with an element of gifted equity. Off the back of that, I’ve spoken to several brokers heavily involved in the buy-to-let space and they’re seeing lots of their landlord clients looking to offload the parts of their portfolios that are either low yielding or have an EPC below C. 

“We are arguably witnessing the start of the Great Landlord Sell-off as buy-to-let becomes a less attractive investment due to tax changes in interest relief, stamp duty land tax and new EPC rules due to hit in 2025. Increasingly, amateur landlords are deciding to call it a day … they can ask agents what the market value of the property is and then sell directly to the tenants to avoid any agents’ fees.”

Another broker – Ian Hewitt of The Bearded Mortgage Broker – comments: “Some tenants are now in a position to borrow with more options in the mortgage market to assist them, such as family support mortgages and the like, and they are in pole position if their landlords approach them about a sale. However, the knock-on effect of this landlord exodus is going to cause some serious issues going forward given the lack of rental stock available and inflated prices.”

Other brokers say this growing trend will mean that amateur landlords are more likely to quit while experienced ones stay the course. 

“The buy-to-let market is currently undergoing a profound transformation. Dinner party landlords are now looking at the forthcoming EPC requirements and are deciding to sell at arguably the top of the market. This does give an opportunity for some tenants to purchase but I have also spoken to a number of tenants for whom, due to their credit history, purchasing a property will not be on the cards for a few years yet” explains Imran Hussain of Harmony Financial Services. 

Mike Staton, director of Staton Mortgages, has so far seen little sign of an exodus but believes it is coming: “I have accumulated a big portfolio of BTL clients over my career and only one of them has sold their properties during the past three years. For me, rental valuations are increasing significantly and although interest rates are increasing, these costs will inevitably be passed on to the tenant through rent. This will then make it more difficult for tenants to get onto the property ladder as the disposable income will not be there to save for a deposit. 

“For me, the landlord market is still fruitful and will continue to remain so, however with the new legislations coming into play, such as licensing and EPC guidelines, I think we will see the death of the ‘cowboy’ who has no intention to care for the wellbeing of their tenants and just wants to make a quick buck. That will not be a bad thing.”

A recent poll of over 700 landlords by Nationwide-owned service The Mortgage Works showed just 22 per cent supportive of government plans to abolish S21 eviction powers. Many of the landlords were concerned they could be left vulnerable to difficult tenancies.

A full 25 per cent of landlords admitted they would sell some or all of their properties if this proposal happens. That rose to 32 per cent of those landlords with large portfolios of 20 or more properties.