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Tenancy agreements: are upcoming changes good or bad for landlords?

Understanding tenancy agreements is crucial for anyone investing in property as a buy-to-let landlord, and there could be some major changes coming up.

A tenancy agreement is a contract between the tenant and the landlord of any privately rented or socially rented property in the UK. They set out any legal terms as part of the rental, and are normally in written form although can be verbal agreements in rare cases.

Tenancy agreements can either be for a fixed-term, such as 12 months, or periodic, which means they run on a week-by-week or month-by-month basis. The most common type is an assured shorthold tenancy, meaning they normally start as a fixed term and then become a rolling tenancy, or the landlord and tenant can agree a further fixed term.

However, the upcoming Renters Reform Bill plans to abolish assured shorthold tenancy agreements in favour of a “single system of periodic, or ‘rolling’, tenancies”, meaning tenancies will work on a month-on-month basis with no specified end date.

If or when these changes come into effect – which at the moment is uncertain as the Renters Reform Bill is still passing through Parliament – it could mean tenants will no longer be locked in for a minimum period of time decided by landlords, and will be able to provide two months’ notice to leave the tenancy at any time.

However, a more recent proposal came in to suggest that tenants will need to live in a property for a minimum of four months before giving notice to leave, to give landlords more stability and prevent long-term lets being treated more like short-term lets.

Campaign to retain fixed term tenancy agreements

The purported idea behind the changes within the Renters Reform Bill are to make the private rented sector fairer for both tenants and landlords. The Bill also includes changes to the eviction process and rules, which are also set be amended to ensure that no changes come in before the court system is fit for purpose.

However, certain aspects of the bill, including abolishing assured shorthold tenancy agreements, have been criticised by those in the industry.

Propertymark is one such opponent to the idea, and the professional body’s CEO Nathan Emerson had a meeting with housing minister Jacob Young MP last week to outline what they believe is the importance of retaining fixed term tenancy agreements due to its benefits to both tenants and landlords.

He pointed out that for tenants on low incomes or with poor credit histories, fixed term tenancy agreements allow a guarantor to be “confident about the length of time they are signing up to support them”. He also noted that in the student rental market, the nature of the academic year makes it more suited to fixed tenancy lengths.

Propertymark also pointed out the need for more mandatory grounds, including “breach of tenancy, deterioration of property and acquiring a tenancy by using a false statement, as well as ensuring that any new requirements for landlords to belong to a redress scheme align with existing redress scheme requirements for letting and property agents”.

Working with the government

Nathan Emerson, Propertymark CEO, said after the meeting: “We had a very positive meeting with the Housing Minister who is absolutely engaging on all aspects of this important piece of legislation.

“We know from member agents the importance of retaining fixed term tenancies as well as ensuring the reformed grounds for possession are robust and fit for purpose. The road map for regulation and the landscape for how landlord redress will work in practice are also key concerns that we raised with the Minister on behalf of members.

“We look forward to continuing to work with the UK government to ensure the Renters (Reform) Bill delivers its aims, we reduce unintended consequences, and it works for everyone.”

Further comments on the changes

Speaking about the upcoming changes to be made through the Renters Reform Bill, including abolishing assured shorthold tenancy agreements, Stephen Burke of Taylor Wessing said: “Assuming that the Bill becomes an Act, it will certainly revolutionise the private rental sector by abolishing fixed term ASTs.

“However, removing no-fault evictions may result in a proportion of landlords no longer being willing to let properties due to a perception that they will find it more difficult to get possession of those properties back. Consequentially, this could push up rents by strangling an already limited supply of rental accommodation.

“Whilst the Bill does attempt to expand the grounds upon which possession can be obtained, landlords will be all too aware that the Court system can be time-consuming and expensive.

“From the perspective of tenants, enhanced regulation and a relaxation towards allowing pets in rental accommodation is a positive step and the abolition of section 21 notices will be welcomed.”

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