Eric Pickles, the Communities Minister, thinks his tenants' charter will solve all of the problems of the private rented sector. He's wrong.
The Government announced a “tenants’ charter” last week, which Communities secretary Eric Pickles argued will encourage longer fixed-term, family-friendly tenancies and raise standards in the private rented sector.
Pickles says the new package of measures will also mean an end to hidden fees when renting a home and the introduction of a model tenancy agreement, clearly setting out the rights and responsibilities of tenants and landlords.
Tenants will also be clear on what to expect from their tenancy and if something goes wrong, where to go for help.
But will the tenants’ charter actually help improve the notorious private rented sector? There are lots of reasons why the answer is no.
At the moment most tenants are on assured shorthold tenancies, typically lasting for an initial period of six months or a year and then “rolling” on a monthly basis after that. Landlords have to give renters two months’ notice if they want them to move out after the fixed period has expired.
Tenants complain that this leaves them potentially looking for a new home on a regular basis. It’s a particular issue for families with school-age children who don’t want their kids to keep moving schools.
All tenants complain that regularly moving is expensive with letting agencies demanding high upfront fees as well as deposit money.
Pickles’ answer is for tenants to have the right to demand longer tenancies of between two and five years. Fair enough, but there’s one big problem: the majority of mortgage lenders insist landlords offer tenancies of no more than one year.
Mortgage lenders like short-term agreements as they make it easier to repossess a property if the landlord falls into arrears.
So most landlords with a buy-to-let mortgage would be in breach of the loan’s terms and conditions if they gave tenants a longer tenancy. This can have serious consequences – including the lender calling in the loan.
There are one or two exceptions. Nationwide recently announced it would allow tenancies of up to three years, while buy-to-let specialist Paragon doesn’t have a cap.
But landlords are unlikely to pick one of these lenders to make tenants’ lives easier – they’ll go for the cheapest mortgage option instead.
Meanwhile owners of leasehold flats will usually find their lease contains a clause banning sub-letting on a contract longer than 12 months.
Until lenders re-write their contracts, and freeholders their leases, most landlords won’t technically be able to offer longer-term tenancies.
The tenants’ charter would also mean an end to “hidden fees” on tenancy agreements. Tenants renting via letting agents routinely have to pay hundreds of pounds for signing a tenancy agreement, credit checks, inventories, checking-in and checking-out and vague “admin fees”.
Back in March the Advertising Standards Authority (ASA) ordered letting agents to display their compulsory fees and charges in all display advertising and property listings. Read Letting agents ordered to display their fees for more.
But tenants’ groups quite rightly say that just clearly displaying the fees isn’t enough – they should be banned altogether.
Housing charity Shelter is campaigning to have letting fees to tenants banned in England and Wales after similar fees were outlawed in Scotland last year.
Model tenancy agreement
Pickles’ tenants’ charter also included the introduction of a model tenancy agreement. He wasn’t particularly forthcoming about the details though, except to say the agreement - developed together with the private rented sector - will clearly set out the rights and responsibilities of tenants and landlords, and “provide the rental market with an industry benchmark for written tenancy agreements”.
You could argue the Assured Shorthold Tenancy agreement already spells out the rights and responsibilities of both parties. However, there is a consensus among landlord and tenant groups that a better understanding is needed on certain issues.
The model agreement will also help tenants know where to turn if they have problems with their tenancy.
In short, Pickles may have the right idea with the introduction of a tenants’ charter, but until he has properly consulted tenants, landlords and mortgage lenders, it’s difficult to see how his current proposals can lead to an effective way forward.
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