How Long is the Tenancy?

By 11th June 2016Lettings

Why only a six month initial tenancy?

One of the questions I get asked most frequently is what length of tenancy do you offer and my answer is unfailingly six months initially unless you the landlord specify otherwise.

Why? Because in the majority of cases I don’t know the tenants and in every case I don’t know what the future will hold for the tenants, the landlord or the world in general.

At the end of the six months, after taking my landlords instructions, I will offer the tenants three options, give notice and leave, allow the tenancy to become a periodic tenancy (often known as a Rolling Tenancy) or to renew for six to twelve months.

In the past I have had both landlords and tenants who have asked for longer tenancies, however experience tells me this is a bad idea….

Two years ago I was approached by a landlord who had let privately to the daughter of someone they knew, it seemed easy and a two year tenancy was arranged, five months down the line relationships were strained, the tenant was withholding rent for what the landlords felt were unrealistic demands and a UN Peacekeeping force was en-route. We ummed and ahhed and then decided if nothing else it would be good experience and so we stepped in, reality was agreed, issues were resolved, rent was forthcoming and the tenancy has subsequently continued (not all plain sailing we will admit) and been renewed for a fixed term of a year, however if that hadn’t been the case the landlord would have been forced to proceed along the Section 8 notice route, citing their reasons to meet criteria, and using the courts, expensive, long winded the tenant can dispute a Section 8 notice and with no guarantee the judge will agree to evict the tenant. If the landlord had agreed a six month tenancy at the outset they could have served Section 21 notice, which doesn’t need a reason, for the tenant to leave at the end of the six months.

I have several situations where landlords have been glad that it was only a six month tenancy, from divorce and redundancy to illness and bereavement and in one case to home their parents.

Additionally, unless there is a clause in the tenancy you cannot increase the rent during the fixed term and again who knows what the future holds, costs increase, legislation changes, interest rate rises, market changes and personal circumstance changes are all issues that landlords need to consider. (we will cover rent increases in a later blog)

Let’s also consider what can happens with tenants, they also can separate/divorce, lose their jobs, get re-located with work, have children, all of which may mean if they don’t give notice, you may need to.

So what’s my point? By offering a long-term tenancy you waive your right to rely on a Section 21 Notice for the vast majority of the tenancy (unless there is a break clause in the tenancy agreement), and that’s a very dodgy position for any landlord to put themselves in.

In conclusion, a section 21 is a very useful tool when you need to reclaim your property, whether by circumstance or because you need to get the tenant out, and by keeping your tenancies short you’ll always be relatively close to the period where you can serve a Section 21 Notice (instead of a Section 8), so damage can be limited.

My point is that long term tenancies make landlords a lot less flexible.

This blog is always about my point of view for the landlords, however as a thought,  I don’t believe long term tenancies are in the interest of the tenant, on viewings I explain to them that they don’t know the neighbours, don’t know the property, don’t know the landlord (and even if they do relationships can deteriorate) so what would happen if they sign a two year tenancy and want to exit early? If the landlord isn’t willing to let them terminate early there will be penalties, and even if the landlord will allow them to terminate early (after all what’s the point of keeping an unhappy tenant), there still could be early vacation costs.

Tarot cards

What does the future hold?

We understand that many agents use tenancy renewals as an income, charging both landlord and tenants for the privilege and offering no alternative. In the interest of transparency, at Wilson Tominey we will ask our landlord what options they will consider:-

  • Serve notice
  • Offer the tenants a new fixed term of six to 12 months with a two month break clause
  • Allow the tenancy to continue on a periodic (rolling) basis

We will then offer the tenant the options agreed by the landlord, if the landlord specifies they have no preference we will then ask the tenant which option they would like to take up, agree with the landlord and start the process.

We do not charge for tenancies that continue on a periodic basis, if the landlord only wishes to offer a fixed term extension then there is an administration fee for the landlord of £60, if the landlord stated no preference there is no charge to them, if the tenant chooses a fixed term we charge them the admin fee of £60, if they choose a periodic tenancy there is no charge to them, we don’t force tenancy extensions on either party and only charge an admin fee to the party that chooses tenancy extension as an option.

Mark

Agreements – Guide for Landlords