Minimum term for the PRS

Global Publication July 2018

The government is on a mission to deliver a “fairer, good quality and more affordable private rented sector”. Recent steps taken in this direction include a database of rogue landlords and agents. Other changes in the pipeline include a ban on tenant letting fees (see our May Focus), a requirement that landlords join a redress scheme and that all letting agents are registered.

Attention has now turned to the terms of assured shorthold tenancies (ASTs), the most common form of tenancy in the private rented sector.

The government considers that, given the increasing size of the sector, there is a need for longer and more secure tenancies than the minimum six months offered by the AST regime. In a consultation published this month by the Ministry of Housing, Communities and Local Government entitled Overcoming the barriers to longer tenancies in the private rented sector, views are sought on a new longer term tenancy model and how to implement it.

The main components of the proposed new model are

  • A three-year fixed term tenancy but with a break right for the tenant and landlord after the initial six months if they are “dissatisfied”. If the right to break is not exercised, the tenancy would continue for a further two and a half years.
  • After the initial six months, the tenant would be able to terminate the tenancy by giving at least two months’ written notice.
  • Landlords could recover their property during the fixed term on grounds similar to the existing grounds in Schedule 2 Housing Act 1988, such as antisocial behaviour or non-payment of rent, and also if they intend to sell the property or live in it themselves.
  • Rents could only increase once a year and how rents increase must be clear at the outset when advertising the property.

There is scope for exemptions from the three-year fixed term, with suggestions including student accommodation and holiday lets. The consultation asks what other exemptions might be necessary or justifiable.

The consultation also seeks views on implementation, with proposals ranging from compulsion through legislation to financial incentives for landlords and voluntary measures.

Given the potentially far reaching consequences of any such changes, the consultation period is relatively short: responses are required by August 26, 2018.



Contacts

Head of Real Estate, London
Knowledge Of Counsel

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