Government proposes minimum three-year tenancy terms

Renters would be able to stay in their homes for at least three years under new government proposals aimed at giving both them and landlords more security.

Secretary of State for Communities James Brokenshire wants to introduce a minimum three-year tenancy term with a six-month break clause, to help renters “put down roots” and to give landlords “longer term financial security.”

The government will consult on the proposals until August 26 2018, and is seeking views from landlords, tenants and related organisations about the most effective ways to tackle obstacles to introducing longer tenancies.

Current rental contracts

The majority of rental contracts are currently Assured Shorthold Tenancies (ASTs) with a minimum fixed term of either six or twelve months.

It is possible for tenants and landlords to agree longer terms between them, but most don’t do this, despite the fact lenders have become more open to offering buy-to-let mortgages to landlords who would like to provide tenancies lasting longer than a year.

Several have already amended their criteria to allow tenancies up to three years, which should make life easier for landlords if the government’s proposals become law.

Benefits of longer tenancies

Longer tenancies can benefit both landlords and tenants. For landlords, it means consistent rental payments, provided of course they have a reliable tenant living in their property. Some landlords will freeze rents for good tenants to ensure they don’t lose them. However, for those with problem tenants, many are concerned that longer-term tenancies could make it harder to remove them.

Landlords could be offered financial incentives to encourage them to offer longer-term tenancies. These could be particularly useful in light of recent regulatory and tax changes which have increased costs for buy-to-let property owners. For example, anyone buying a property in addition to their own home must now pay an additional 3% stamp duty surcharge on top of normal rates, whilst tax relief on mortgage interest for higher and additional rate taxpayers is gradually being reduced.

Many landlords have remortgaged over the past few months in order to keep costs down, and longer-term tenancies could provide them with additional peace of mind that they won’t suddenly face a potential void period after just a few months.

Tenants would also benefit, as currently they may be forced to move at short notice due to the terms of their rental contracts. Longer tenancies would make it easier for them to plan for the future, although there would be exemptions for certain types of tenants, such as students, who only need to rent for a short period of time.