A friend was telling me recently about a situation she is in with her 9 year tenancy in a rented property. She lives with her three children under 11 and over the 9 years she has always paid her rent on time, has re-done the garden, re-painted a few times and even put brand new laminate flooring throughout (with the permission of her landlord). She views the property as a home for her family and as her landlord was an overseas investor, she always felt she had the freedom to do what she wanted and felt secure that he would never need to ask her to leave.
Unfortunately, a ‘for sale’ board appeared outside one day. Her landlord had decided to sell on the open market and there was a possibility an owner occupier could purchase her home rather than another buy-to-let landlord. As she has been on a month to month tenancy for nearly 8 years, she is now faced with the possibility of having to uproot her family at short notice. However, rents have increased over the past 9 years and she is unable to afford the same calibre of property anymore, or in a part of town where her children go to school. Due to this, she has had to consider social housing as she is desperate to get on the property ladder but as this has come out of the blue, isn’t in the financial position to do this now and the properties that are available at the rent she can afford, are not in a great condition. As you can imagine, this has resulted in a fraught and stressful situation where she is unsure when she will need to leave and where she is going to house her family.
My question to her was why, during the nine years she had resided in the property, had she never approached her agent about negotiating a further fixed term agreement. As someone who is settled and investing in her home, it would have been prudent to lock her tenancy in place for a fixed period of time at a set rental amount. She could have negotiated several of these fixed terms throughout her time at the property normally for a small cost with her agent. Her response was that it had never been advertised by her agent as a possibility and she had felt secure from the assertions of her agent that her landlord would never sell.
When an initial fixed term tenancy comes to an end, it automatically roles on to a month to month or ‘statutory periodic’ tenancy. This kind of tenancy is uncertain for both landlord and tenant, a tenant can give one months’ notice to vacate (in line with the terms of their tenancy) whilst equally, a landlord can serve a section 21 notice giving their tenants two months’ notice to vacate at any point. Furthermore, a landlord can also serve a Section 13 notice to increase the rent during a periodic tenancy provided they give with one months’ notice, these notices are difficult to oppose and unless they apply to the first tier tribunal for a rent review, a tenant must pay the increase from the date on the notice. Many landlords and tenants are unaware, or are aware but do not see the benefits of negotiating a further fixed term renewal once this inital fixed term ends.
Below are just a few of the benefits;
Benefits for landlord
- A landlord has a continued, fixed, guaranteed source of income. Most renewals are for 12 months however you can suggest 6 months, 18 months, 24 months, anything up to 35 months and 29 days as anything over 3 years must be created by a deed rather than a tenancy agreement.
- A rent increase can be negotiated as part of the new contract, thus increasing your monthly income but also reaching an increase your tenant is comfortable with and will not force them in to looking for somewhere else.
- The certainty that you will not have to begin the process of negotiating a deposit, carrying out maintenance/cleaning at the change of tenancy, locating new tenants and paying set-up fees for at-least another 12 or 24 months depending on what is agreed.
Benefits for tenant
- You have occupation of your home for a further fixed period and you don’t have to worry about the uncertainty of being served a Section 21 with two months’ notice out of the blue.
- If your landlord is looking for a rent increase, this can be negotiated whilst you are discussing the renewal and gives you a lot more scope of discussion about this rather than just being served with a notice and having to comply. Things like confirming you will conduct maintenance, decoration at the property can be included in these negotiations.
- Not having the worry of having to negotiate your deposit return, find a new home, go through referencing and pay new tenancy set up fees. When you include moving costs, fees, initial rent, the deposit, the average cost of moving rental property right now is around £1500.00.
- Your landlord cannot decide he wants to sell on the open market and the new owner, who may be an owner occupier serve you a notice to vacate at the earliest opportunity. If your landlord did sell, he would have to sell on the basis there is a tenant in situ.
Obviously sometimes both tenants who are looking to move on but not sure when, and landlords who are thinking of moving back in or selling may turn down a request for a fixed term renewal as the flexibility of a periodic tenancy suits them. However, there is always the possibility of adding a break clause into the special clauses of your tenancy agreement confirming either party can end the tenancy at an agreed point, generally 6 months into a 12 month tenancy. If you are currently in a periodic tenancy or have tenants on one and my points above resonate with your current situation, contact your landlord, tenant or agent to put this request forward ASAP.
Angharad Trueman – Operations Manager