Cash incentives for longer tenancies

On paper, a longer tenancy is a win-win for everyone involved (except perhaps the letting agent).

For the landlord, you have a secure income stream, and the comfort in knowing that your property is being cared for by someone who considered it their home. For the tenant, they can relax, safe in the knowledge that they can unpack all of their boxes without the concern of having to be on the move again in six months.

However, despite the obvious benefits, and the government’s plans to move towards a three-year tenancy, this option is not as cut and dried as it sounds.

What’s the new scheme?

A consultation (which closes on August 26th, you can read more here), released this week by the Ministry of Housing, Communities and Local Government, has highlighted proposals for a three-year tenancy agreement as standard, in a bid to replace the standard AST.

Under the new proposal, it would be required to offer a minimum three-year tenancy. There would still be scope for either landlord or tenant to break the agreement after the initial six months at a break clause, with the tenancy continuing following this, with either party able to exit the agreement if they provide two months’ notice in writing.

After the initial six months, the landlord can only regain possession of their property during the fixed term if they intend to sell the property or by serving a Section 8 – although this is a ‘at fault’ notice, so the tenant must have given them reason to serve this notice (anti-social behaviour, failure to pay rent etc). A section 21 notice can still be served, but not until the end of the tenancy term.

What are the issues?

Whilst there are definite benefits to the scheme, there are some negatives to the idea as well, with many industry bodies concerned about the introduction of a statutory requirement of three-year tenancies.

Whilst recent research from Direct Line has revealed that many people are choosing to rent over buying, it shows that they are choosing this option for the flexibility it provides, allowing them to move around with ease. A longer tenancy would put paid to this flexible option.

It would also make things very difficult for student landlords, although there is discussion regarding exemptions for short-term lets or student accommodations to be able to apply for an exemption.

With landlords, and the industry, so dubious about the change, the government is making bold statements about incentivising the scheme. The payments, which are still in the discussion stage, would be administered by local authorities, and in order to receive them a landlord would have to demonstrate that they were fully compliant with landlord laws, such as gas safety checks, deposit protection requirements, and Right to Rent.

Industry bodies, namely the Residential Landlords Association, have suggested this week that landlords may be more inclined to get involved with the scheme if it allowed them eligibility for tax break. We will have to wait until the Budget in November to see the likelihood of this (although don’t hold your breath)!

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