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A new tenants’ charter

RLA
Written by RLA

The Government wants to introduce a Tenants’ Charter which would include a new ‘family friendly’ model tenancy. We take a look at what would be involved….

The Government wants to introduce a Tenants’ Charter which would include a new ‘family friendly’ model tenancy. We take a look at what would be involved.

What is this Tenants’ Charter?

It was announced at the Conservative party conference by secretary of state Eric Pickles and is currently out to consultation. At its heart is the desire to create longer, more family-friendly tenancy agreements. Such tenancies could last three or five years rather than the six to 12 months that are currently the Assured Shorthold Tenancy norm.

The charter is also intended to be a simple guide for tenants, suggesting questions they should ask before entering into agreements, and telling them about sources of help should things go wrong.

The charter has nine and a half pages on tenants’ rights and half a page on their responsibilities.

Will tenants have the automatic right to longer tenancies?

No. It looks as though there will be no element of compulsion, and the charter, as proposed, is voluntary, not legislative.

Tenants cannot demand an agreement lasting, for example, five years. However, they would be able to request one.

What then?

The charter emphasises the need for landlord and tenant to talk to each other and negotiate, so the onus is on the landlord to consider the request rather than turn it down flat. The charter proposes a probationary period before any contractual agreement for a longer tenancy, which seems entirely sensible.

It also suggests further safeguards allowing either tenant or landlord to break the agreement – for example, if a change in circumstances meant the tenant wanted to move out, or if the landlord wanted to sell the property or move into it themselves.

Would a five-year tenancy agreement mean the landlord couldn’t put up rents?

No. It is envisaged that the new tenancy agreement model would build in regular rent reviews in line with inflation.

What is in it for landlords?

Longer tenancies mean no void periods and therefore no loss of income. Indeed, landlords seem keener than tenants on longer tenancies. According to former

ARLA president Lucy Morton, who runs the lettings operation at London firm WA Ellis:

“Often it is the landlord who will commit to a longer term and it is the tenant who wants the flexibility of a break clause after six months.”

What about my right as a landlord to evict tenants who have fallen into arrears or misbehaved?

The devil will be in the detail, but Eric Pickles says that the introduction of longer tenancies via a new model agreement will not change the legal landscape. This will be critical in order to get landlords on board.

What is the Residential Landlords Association’s view on all this?

The RLA welcomes the voluntary approach.

The RLA is also mentioned in the official government announcement as the only landlords’ body to have come up with proposals on tenancies.

Alan Ward, chair of the RLA, says that the charter should provide greater security for the growing number of families living in the private rented sector, while providing flexibility.

He says: “The RLA has led the charge against calls for a rigid, standard five-year contract, which would not be needed by the vast majority of private sector tenants. It would also have given tenants a one-way ticket to leave the property whenever they liked. Under the charter as proposed, tenants would be better informed about options already available to them to be agreed by both the tenant and landlord.

“At the heart of the private rented sector is the need for a balanced relationship between the landlord and tenant which enables them to hold each other to account.

“The proposed charter provides security and flexibility, and strikes the right balance between the landlord and tenant without the need for heavy-handed legislation.”

My mortgage lender specifically insists that my buy-to-let property can only be rented out on Assured Shorthold Contracts of six to 12 months. If I were to offer five-year tenancies, I would be in breach of my lender’s requirements.

This is where most of the work will have to be done and Pickles has announced a ‘summit’ of buy-to-let lenders. Nationwide earlier this year announced that it would allow buy-to-let borrowers to enter into tenancies of up to five years; the Government is hoping other lenders will follow this example. Some may need convincing: they would want to be sure that landlords still have the power to repossess properties under Section 21, and that if they as lenders have to repossess a rental property because the landlord owner is in mortgage arrears, they will not be ‘stuck’ with a five-year tenancy agreement which could well be inappropriate.

Much depends on how a new model tenancy is framed, and the RLA is one of the key industry bodies being consulted on this. We are aware of the issues.

Anything else?

Yes. The Tenants’ Charter will tackle the subject of letting agent fees charged to tenants. The charter will lay emphasis on the need for transparency about fees, and ensure that prospective tenants know full costs before they sign up to any contract.

While the charter will be voluntary rather than statutory, it will operate alongside the forthcoming requirement for letting agents to belong to a redress scheme – meaning that agents who have not been clear about fees as per the charter could be investigated by one of the property ombudsmen.

However, be aware that this is a tenants’ charter, not a landlords’ charter: agents’ fees charged to landlords are not part of it. Landlords can, of course, still complain to an ombudsman (currently agents are signed up voluntarily to redress schemes but next year this will be compulsory), if they feel they have been ripped off.

Landlords will not be able to point to what the charter says about fees that they, as opposed to tenants, pay agents.

It all sounds fairly reasonable. Does anyone actually object to the idea of a tenants’ charter?

Where to start! This looks like being a political football, and with less than two years before the next General Election, it will be interesting to see the timescale for the introduction of the Tenants’ Charter.

Shelter, for example, has called the proposals toothless because they are voluntary, not legislative.

Which? sees things slightly differently, viewing the charter largely as a crackdown on fees charged by agents – interestingly, fees charged to both tenants and landlords.

Which? executive director Richard Lloyd says: “We welcome this crackdown on hidden charges in the rental market. People need to know exactly what they are signing up to, so that they can more easily shop around. Longer tenancies could also mark the end of unnecessary renewal fees for landlords and tenants.”

Labour’s attitude does not differ too much from that of Which? Former Labour housing minister John Healey has attacked the charter and says that it will not stop the “scandal” of “rip-off fees” charged to tenants, and will continue to give “free rein to rogue letting and managing agents”.

Like Shelter, Healey says that Pickles’s plans for a model tenancy agreement and a tenants’ charter are toothless. He says: “Absolutely anyone can set up as a letting or managing agent. There are no rules on agents, so people are often hit by up-front fees, and no rights for tenants – not even the right to a written tenancy agreement.

“No voluntary measures can correct this market malpractice. Regulation is required to make the market work more fairly, efficiently and transparently.”

Healey proposed the Letting Agents (Competition, Choices and Standards) Bill 2013-2014. However, it was introduced as a Ten Minute Rule Bill and these often make no progress, and Healey’s Bill – which had its second reading in October – may prove no different.

However, it will be interesting to see what official Labour party policy will be: would it ditch a tenants’ charter altogether and go for a legislative approach? What we do know is that Labour would run a national register of all landlords – something to which the RLA is opposed. It looks as though Labour would also regulate all letting agents, and stamp out their fees.

Would there ever be a landlords’ charter?

Such a document would be unlikely from any political party, as support of private landlords is not seen as a vote-winner by any party.

Politics aside, a well-functioning private rental market is all about balance: it is about both the rights and responsibilities of both tenants and landlords.

It is clearly important that landlords continue to have the right to remove bad tenants, including those who trash a property or do not pay their rent.

However, currently this process can take months and be at great cost to landlords.

Surely this process should be speeded up and streamlined, with faster court action.

Without the ability to evict bad tenants, landlords will not wish to invest in the market – and this would reduce the supply of property and raise rents, which would scarcely help tenants.

Good landlords have long accepted that they have responsibilities towards their tenants, both legal and ethical: these include supplying clean, decent and safe accommodation which tenants can truly regard as home.

Tenants for their part need to know they must pay their rent and keep the property in reasonable condition. Both landlords and agents should know that if they do not adhere to their respective responsibilities, they forfeit their rights.

The OFT says it has no powers to regulate the behaviour of tenants.

Further Information

About the author

RLA

RLA

The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 23,000 subscribing members, and an additional 16,000 registered guests who engage regularly with the association, we are the leading voice of private landlords. Combined, they manage almost half a million properties.

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