With the announcement of the new “tenants’ charter”, Kate Faulkner looks at the impact new rules and regulations could have on renting a property.
Despite the Government’s commitment to reducing red tape, recent announcements of a “tenants’ charter” suggest more rules are on the way.
Although there won’t be any legal changes involved, the Government wants to “provide stability” and “avoid hidden fees” for families who rent, through introducing long-term, fixed, “family-friendly” tenancies.
The idea is to create a “model tenancy agreement” that will “set out the rights and responsibilities of tenants and landlords” and provide an industry benchmark for written tenancy agreements. The “tenants’ charter” is also intended to help educate tenants and provide guidance on what to do and whom to turn to for help when things go wrong.
While all that may sound like steps in the right direction from a tenant’s perspective, the reality is rather different.
Most tenancies are ended by tenants, not landlords. According to Savills, only around 20 per cent of landlords end a tenancy agreement, so the majority of tenants are unlikely to be interested in committing to longer-term agreements as they tend to value flexibility.
More rules and regulations tend to translate into higher costsAnd for those who are looking to rent long-term, it’s already quite possible to do so. National Approved Letting Scheme (NALS) or Association of Residential Letting Agents (ARLA) member agents have good contracts, a free complaints service via the likes of the Property Ombudsman Scheme, and all rental monies are protected through insurance.
These agents are also committed to a code of conduct, so tenants can be confident that arrangements made regarding the intended length of their rental period are likely to be honoured.
The new charter won’t make much of a difference to experienced landlords, either. Those operating in a professional way will already have decent agreements in place and, contrary to what many outside the industry seem to believe, the vast majority also want long-term tenancies.
Changing tenants involves more administration expense and the risk of void periods, and tenants who are committed to a home for longer tend to take better care of it.
The main restriction on implementing these planned longer tenancies will be imposed by lenders who don’t want to expose themselves to the risk of a non-paying tenant in a long-term agreement.
If the landlord isn’t receiving rent, they may not be able to keep up their mortgage payments on the property and the lender could end up locked in a lengthy eviction battle.
As a result, unless more lenders follow Nationwide Building Society’s lead of allowing tenants to rent for more than a year, landlords with mortgage borrowing may not be able to offer these longer-term agreements.
One potentially big downside of this policy is that it could drive tenant rents upwards, in two ways.
First, more rules and regulations tend to translate into higher costs to administer a rental. As a result, good landlords and agents are likely to have to raise rents across the board, while rogue landlords who don’t abide by the rules will continue to attract tenants with their lower rents.
Tenants committed to a home for longer tend to take better care of itSecond, the plan to index-link rent review clauses to inflation could cause huge affordability issues for tenants, particularly as wage rises fail to keep up. The Communities Secretary, Eric Pickles, says the implementation of index-linking rents “will provide both landlords and tenants with greater financial certainty to plan over a longer period”.
While that’s true, it’s also likely to mean a huge rise in rents over time for families: great for landlords, not so good for tenants, who have historically benefited from much lower increases.
The Office for National Statistics private rental index shows that rents have gone up by an average of 8.4 per cent over the past 10 years, while inflation over the same period has risen by more than 25 per cent.
However, one area where this initiative might really benefit the industry is through the £3 million fund being made available to English councils to “help them tackle acute and complex problems with rogue landlords”.
This, along with increased publicity aimed at tenants to help them identify the good agents and landlords and avoid the rogues, should go some way to raising standards and improve renting for everyone.
Source: The Telegraph