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Long tenancies “may force mass BTL sell-off”
Proposals by Labour to move towards longer tenancies of two or possibly three years may lead to a mass sell-off of properties owned by small-scale buy to let landlords, under pressure from their mortgage lenders.
Tom Henry, head of PRS investment at the JLL agency, says: “The overwhelming majority of buy to let mortgages limit the lengths of assured shorthold tenancies to 12 months to protect banks‘ ability to recover loans.”
However, Henry goes against the grain of several other lettings industry commentators by saying that the Labour proposal for longer tenancies might not deter Built To Rent, the growing niche of branded purpose-built lettings blocks being constructed and managed by specialist firms; there are several currently in London with others expected to be developed in cities across the UK in the next few years.
JLL cites Qatari Diar Delancey’s Get Living London – managing East Village on the former Olympic Park site – as one example of an operator which voluntarily offers longer-term tenancies and capped rent rises “without significantly affecting their business model.”
Last week the government hinted that it, too, may be looking at longer-term tenancies for private lets by releasing a model tenancy agreement which could be used voluntarily by agents and landlords.
Revealed by housing minister Brandon Lewis at the RESI14 conference at Newport, Gwent, the agreement is available free of charge and in full on the DCLG website. It runs to 38 pages in total and includes landlords’ and tenants’ checklists, key dates in any tenancy, and the agreement in principle.
It also offers guidance on elements that are critical to lengthening the standard tenancy – how to give prior notice to tenants of grounds for possession, the landlord’s possible break clause, especially for the purpose of selling a property, and some suggestions about rent reviews.
Lewis told the RESI14 conference that the government’s guiding principles were to make such tenancies – and as many other measures as possible – voluntary rather than mandatory, as the vast majority of landlords and tenants behaved honourably and had perfectly amiable dealings throughout tenancies.
