Wednesday, 22 June 2016

How Long Should A Tenancy Agreement Be? Anything But Long!


I know I’ve mentioned the shit-storm that is long-term tenancies in the midst of various other posts, but I can’t remember if I’ve previously thrown the issue onto its own platform. I have a nagging feeling I may have. Urgh, my declining memory continues to haunt me like a cluster of fiery genital ulcers.
A simple search through the blog archives would quickly provide an answer, but the fact I can’t remember off the top of my puny little head tells me that if I have done, it was probably many moons ago, and therefore most likely a decaying pile of turd, so it’s probably best if I don’t torture myself by crossing paths with it. Ever again.
I’ve discovered that reading through old blog posts is like looking through old photos, it’s utterly self-loathing and a remarkable method of self-torture. And let me assure you, I truly looked like an unbearable greasy little tit during my youth. My stomach turns violently when I look through my photo albums. Of course, at the time, I thought I looked like a formidable force to be reckoned with. Ladies watch out. In reality, the only thing they needed to watch out for was the oozing, gooey hair-gel dripping from my glossy hair; it was a health hazard. It looked like 20 guys spunked over me. What was I thinking?
Point being, even if that illusive blog post does exist in the darkest depths of this cesspit, it probably needs burning to the ground and rebuilding. So if you’re a long time subscriber, forgive me if the following post sounds a little too familiar in parts.

Page contents:

THE TENANCY AGREEMENT FIXED-TERM LENGTH

My interest in this particular subject, ‘the length of a tenancy agreement’, was recently reignited after I caught a glimpse of a scuffle on Twitter, between someone that goes by the alias ‘Rent Rebel’ and some other veteran Landlord I’ve been following for some time now.
‘Rent Rebel’ was showing a particular passion for long-term tenancies and grilling the landlord for allegedly not offering them to her tenants (I have no idea how the drama started). From what I gathered, he felt landlords only give a shit about themselves, because not enough of us offer the security of long-term contracts to our tenants.
Of course, any chimp with a brain the size of a toenail will know that’s not really the reason why landlords don’t offer long-term tenancies. In his defence though, I think he’s some kind of ‘Tenants Right Activist’, so he’s only naturally going to be deluded and incapable of being objective.
Should long-term tenancies be mandatory? If you ask me, no, because that’s the dumbest shit I’ve ever heard.
What if I only want to rent my house out for a year? What about those tenants that only want to rent temporarily? Would those popular and required markets suddenly close and/or become extremely limited?
Let’s not forget, my mate Ed Miliband was proposing to introduce mandatory 3 year tenancies as part of Labour’s pledge in 2015… and they lost. Oh well.
Ok, anyways, onto the core question, and I’m sure it’s a question all new landlords will ask themselves at some point, how long should the fixed-term of a tenancy agreement be? What’s the most sensible length? I’m going to give my thoughts, but I’m going to answer the question by explaining why long-term tenancies are generally a pile of shit and why they should be avoided like a steaming barrel of rat piss.

WHAT DEFINES A “LONG TERM” TENANCY AGREEMENT?

Obviously “long term” can be conceived as an objective metric. I’ve had relationships last for 6 months, each of which I’d classify as a life-sentence, while others would consider relationships with the same duration meaningless flings. So there’s a discrepancy.
In terms of a tenancy agreement’s fixed term, I personally classify 2 years long-term. But perhaps 3+ years is where the general consensus is among landlords and the common folk. Agreed? Cool. So now we have an agreeable measurement.

SOME TENANTS WANT THE SECURITY OF LONG-TERM TENANCIES

I get it. I so get it.
I’m sure many do want the security. No tenant wants to spend resources on making a house into a ‘home’ and then continually have that uncertain feeling of repossession hanging over them. That sounds like a terrible situation.
However, I have a feeling that a large portion of those fighting for mandatory long-term tenancies like the idea of it more than the actual reality of it. I’m not convinced they would sign on the dotted line even if they had the choice. So let’s delve into the “reality of it”…
How many tenants would actually sign a 3 year tenancy before living in the premises for at least a few months? That’s the real question. Bear in mind, a lot of tenants are probably in favour of the argument based on the fact they want the security of remaining in the property they are “currently” joyfully settled and living in. That’s obviously an obscured and puzzled look into the situation, because tenancies, whether they’re short or long, mostly begin before having the opportunity to birth the feeling of comfort. Quite the gamble for the tenant. I’m not sure that everyone supporting the idea of long-term tenancies thinks about that.What do you chumps think?
Ok, I’m sure there are still a bunch of hippy-dippy tenants out there that are die-hard supporters of long-term tenancies. They want the security. They need it. They crave it.
I wonder though, how many of those tenants would commit to paying 3 years rent upfront (assuming they had the finances) for a property they haven’t lived in, while also being uncertain of how reasonable their landlord is? I don’t think many would, but those same people want that same level of commitment from the landlord; they want us to trust them in our investments for 3 years when we generally don’t really know shit about them.
They want us to invest in them, but they won’t invest in us. Mind-boggling, right?

SOME LANDLORDS WANT THE SECURITY OF LONG-TERM TENANTS

I also understand why many landlords, mostly novice ones that live in cloud Cockoo land, which have yet to be burned by a rat-weasel tenant, would favour long-term tenancies.
In theory, it means benefiting from ‘guaranteed rent’ for the next 3 years, and the avoidance of having to endure the painstaking aggravation of having to find new tenants any time soon. Sounds incredible. And it certainly would be, if every tenant on this planet always adhered to the terms and conditions they agreed to in the tenancy agreement, and “guaranteed rent” wasn’t mythical bullshit.
While the argument for long-term tenancies can seem extremely desirable on the surface, I’d say the opposing arguments to offer short-term tenancies are a hell of a lot more attractive for both landlords and tenants…

WHY LONG-TERM TENANCIES ARE JUNK

I genuinely believe avoiding long-term tenancies is in the best interest of all parties involved, but I’m going to tackle the issue from a landlord’s perspective, obviously ’cause that’s what I is:
  • It’s difficult to evict/remove tenants during the fixed term
    One of the most effective and ‘cleanest’ methods of evicting a ‘rogue tenant’ is by serving a Section 21 notice (repossession notice), even though technically a Section 8 notice (eviction notice) is designed to rid of tenants that have breached the terms and conditions of the tenancy e.g. failing to pay rent.
    When using a Section 21 notice, you’re essentially telling your tenant you won’t be renewing the tenancy after the fixed-term has expired, so they’ll have to vacate on the termination date specified (assuming the notice is served correctly). A landlord doesn’t need a reason to repossess their property in this case, and no one can dispute the landlord’s right to do so. Like I said, clean as a whistle.
    I won’t get into more detail about what the differences between the two notices, but for those of you that don’t know, you may want to read the post on Section 8 Vs Section 21 before continuing.
    So let’s translate the difficulties of removing a doughnut tenant during a long-term tenancy using a real practical scenario. If my tenant falls into arrears 3 months after starting a 3 year long-term fixed tenancy, my only sensible option is to serve a Section 8, as opposed to a Section 21 (because the end-date is nothing but a mere dot in the distance future).
    The problem with a Section 8 notice is that the grounds for possession can be disputed by the tenant, unlike with a Section 21. If after serving the Section 8 notice the tenant refuses to vacate, and then proceeds to fight the grounds for eviction (simply because they want to be difficult, which they can), then there’s a good chance you’ll have a legal battle on your hands, and you may require a court order. That’s when landlords get screwed, because this process can take several painful months, especially if your tenant drags their heels (which they usually do so they can remain in the property for as long as possible, and often without paying rent). Plus, it’s not even guaranteed you will win your case by the end of it, particularly because Judges often sympathise with the tenants, despite their wrong-doing(s). It’s a real sucky state of affairs.
    So what’s my point? By offering a long-term tenancy you waive your right to rely on a Section 21 for the vast majority of the tenancy (unless there is a break clause riddled in the tenancy agreement), and that’s a very stupid and dangerous position to throw yourself in, my brother.
    In conclusion, a section 21 is a very useful tool against dipshit tenants, and by keeping your tenancies short you’ll always be relatively close to the period where you can serve a Section 21 (instead of a Section 8), so the damage can be limited.
  • Landlord’s circumstances might change
    I don’t know where I’ll be tomorrow.
    I don’t know whose bored wife I’ll be screwing next week.
    I don’t know if I’ll have a roof over my head next week. Incidentally, it’s not that uncommon (and I don’t know why) for landlords to require possession of their BTL because their personal living arrangements have changed, and now they need their BTL for their own residency.
    My point is, long term tenancies make landlords a lot less flexible/liquid.
  • Tenant’s circumstances might change
    I’ve lost count of how many tenants have notified me of unforeseen changes to their financial situations. It’s not uncommon for perfectly adequate tenants’ to quickly become an unstable bubbling irritable boil, prime to splatter.
    Here are a few examples:
    • My tenants got divorced mid-tenancy, which meant one of them had to vacate. While both were still liable for paying the rent, it still made the situation risky and uncertain. My working professional tenants certainty weren’t as appealing as they once were.
    • One of my very first DSS tenants (this was years ago, when I actually accepted DSS tenants) suddenly had her benefits revoked.
      That was tragically unexpected, because I was told by my loyal and trusting letting agent (this was also when I used high-street letting agents to find tenants) that the beauty of DSS tenants is that rent is guaranteed because the Government pays on their behalf. If you can’t trust the Government, who can you trust, right?
      Needless to say, I fell for my agent’s spiel, and it was just one of several myths that was stuffed into their sales-pitch. They got me good. Shafted. Rent is NEVER guaranteed.
      I was regularly receiving my tenant’s rent directly into my account for several months, and then one day it stopped without warning. No reason was given, and there was nothing I could do about it. Most disappointing was the fact that the local council were beyond useless when I reached out to them.
      In any case, unsurprisingly, my tenant quickly fell into arrears and I had to start the process of eviction. In fact, she encouraged me to send her an eviction notice so she could move up the council house priority list. Don’t get me started!
    • One of my tenant’s lost their job, and she claimed it was due to unfair dismissal. Something about discrimination in the workplace. I don’t remember the precise facts. All I remember is that I didn’t really give a shit.
      So after her dismissal, what did she do? She spent the last of her savings on a Solicitor so she could take her employer to court. She was adamant she had a good case and was due a big payout (because that’s what she was told by her Solicitor), therefore rent wouldn’t be a problem! *slaps forehead*
      You can probably guess how that ended. She soon lost the case, and her husband wasn’t earning enough to cover the rent and bills. They quickly fell into arrears with everyone. I literally mean everyone. They had several debt collectors chasing them for years after they vacated my property. God, they were such a pair of plonkers. The memories and utter stupidity is coming flooding back.
      If she was discriminated against for being a cock-eyed donkey, I’d say they had a point, and the final outcome was always going to go one way.
      But obviously the joke was on me, because they left me £850 out of pocket and with a bathroom saturated in mould.
      Merry Christmas.
    So, even if you have found the perfect tenants, one’s you even feel excited and comfortable with offering a long-term tenancy to, bear in mind they’re not immune to morphing into tenants that aren’t worth pissing on, even through no fault of their own. Circumstances frequently change for everyone.
    Sadly, tenancy agreements aren’t like insurance policies, they don’t suddenly become void if circumstances changes. Although, they really, really, really should be.
  • It’s more difficult to make amendments to the tenancy e.g. increase rent.
    I’m not just talking about the prospect of increasing rent, that’s just the obvious one, and probably the easiest to translate into a real example. But let’s be real, it’s probably the one aspect most landlords give a shit about. I’m not saying I agree or disagree, but I know this is a business (despite popular belief).
    Anyways, essentially, long term tenancies may impede on your ability to increase rent when needed- and I’m not talking about increases out of greed, I mean necessity.
    The premise of a ‘fixed term’ tenancy is typically what it says, the tenancy T&C’s remain the same for the duration. That could mean you will need to keep the rent fixed for the entire 3 years. That’s incredibly short-sighted, because you have no idea if or when your costs will increase, whether it be due to inflation or a new unforeseen legislation, which will require landlords to pull an additional £500 out of their asses *Ahem* Selected Landlord Licensing Scheme.
    Landlording is like any other consumer based business, in the sense that if our running costs increase, we need to fairly pass on the costs to the end consumer. Otherwise we’ll be running at a loss. It’s bad business.
    But let me clarify, I’m not saying it’s impossible to make changes to a tenancy agreement during its fixed-term, but it’s certainly more difficult, and it may mean you’ll need to be extra careful with the clauses in the tenancy agreement, which enables lawful flexibility/amendments.
  • Enforcing a long-term tenancy does NOT work in the landlords favour
    This is probably my biggest gripe with long-term tenancies, and the reason why they make no sense at all to me.
    Assuming you have a long-term tenancy with an eager prospective tenant. They’re hyped, you’re hyped, and you’re both confident it’s going to be beautiful.
    What happens if 10 months down the line your beloved tenant wants to ditch you like a bad case of Syphilis? He officially hates you. You didn’t fix the broken leaking tap in a reasonable time. You’re a piece of garbage as far as he’s concerned.Your tenant wants to end the tenancy agreement agreement.
    So what are you going to do? Force someone that hates you to stay in your property? Bear in mind, they’re bitter, they want to use your nutsacks/clit as golf balls. Would you trust someone like that in your property? Do you want to have a working relationship with your tenant under those circumstances? Oddly, I know many landlords do try and force the tenants in these situations, although I’ve never really understood why.
    Any reasonable landlord will just allow the tenant to surrender the tenancy despite how long is left of the fixed term, subsequently side-stepping the potential drawbacks of caging an animal. The only type of tenant worth a damn is a happy tenant. Every other type is a ticking time-bomb.
    Now this brings me to my point. A long-term tenancy does NOT work in the landlords favour, because if the tenant wants to break it, it’s safer just to break it. On the other hand, if the landlord wants to break it early, what tangible bargaining chip do we have? Absolutely none, so the tenant has no reason to surrender early on our request.
    If you’re a hopeless optimist, you could argue that the landlord could intentionally fail to meet their obligations to repair and maintain. But that’s not technically true, and it’s definitely not a bargaining chip, because the landlord can be prosecuted for failing to meet their legal obligations, which includes the responsibility to repair and maintain.
    So question has to be asked, what security do landlords actually gain by offering a long-term tenancy?

HOW LONG SHOULD YOU OFFER A TENANCY FOR?

Most landlords offer 12 month tenancies. That’s pretty standard. It’s also what most tenants expect.
6 months is also quite common, and I’ve an avid fan of the duration because I feel it’s the safest, particularly with tenants I don’t know or trust. Legally, you can offer a shorter tenancy, but it makes little sense, because you can’t repossess your property earlier than 6 months into a tenancy unless you have grounds for eviction or there’s a mutual agreement to terminate. So really, what’s the point? Plus, offering anything less just seems weird, unreasonable and quite frankly, psychotic.
I personally wouldn’t offer less than 6 months or more than 12 months. When offering a tenancy I make it clear to all my prospective tenants that I’m looking for long-term tenancies (assuming that’s actually the case, which it always is), and the initial 6 month fixed-term (which is what I usually offer) is in place to protect both our best interest (which is true).
If after the fixed term both parties are happy, I’m happy to either offer a new 6 or 12 month contract or allow the tenancy to become periodic (I prefer the periodic option, it’s the most flexible). Whichever the tenant prefers, but once again, I emphasise it’s still a long-term commitment as far as I’m concerned.
From my experience, most tenants are more than happy with those conditions, and it’s never hindered my progress of quickly finding or retaining good tenants.
The reality is, most landlords want good long-term tenants. However, I don’t think it’s safe or sensible to legally bind the long-term aspect of it into a tenancy agreement.

LETTING AGENTS & RENEWAL COSTS

Fair warning notice.
If you use a lousy, money-grabbing, greaseball high-street letting agent to sniff out tenants, you’ll be subject to tenancy renewal fees, which means you’ll have to pay a fee each time a new tenancy is signed by the same tenants. You may want to bear that in mind if you renew the tenancy every 6 months, because you’ll be charged a couple of hundred quid a pop. Yes, daylight robbery considering you’ll be paying them to fetch a couple of signatures.
If you’re unsure if you’re subject to the fee check the T&C’s of your contract or ask your letting agent. The good high-street agents won’t enforce such ludicrous fees, or at the very least, will have reasonable rates.
If your agent is hard-selling a 6 month duration, it’s probably because they stand to profit from it, as opposed to it being in your best interest (even though it is). So buyer beware.
So, what are your thoughts? Are you in favour, against or indifferent about long-term tenancies? What do you offer?
Love & Peace xoxo
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