A bit of a pickle…

The recent announcement by Eric Pickles, the Secretary of State for Communities and Local Government, that the government proposes to introduce a “tenants’ charter”, has elicited a very vocal response and has raised many questions; and on this particular occasion, it isn’t, “who ate all the pies?”  The official-and publicly promulgated-reasoning behind the charter is to improve standards in the rental sector and protect tenants, conferring new rights upon them, including the ability to demand longer tenancies.  The idea of the new measures is that they will provide stability for tenants and enable them to avoid hidden fees when renting a property, which in turn will assist in rooting out rogue operators in the rental market sector.  I hear the rationale and concur with what the proposals are trying to achieve but as always, there is a trade off.  Firstly, the proposals mean that landlords will face significant barriers, not least in the minefield of obtaining mortgages.  Most buy-to-let mortgages only allow a maximum of a 12-month tenancy.  Lenders prefer shorter terms as it make it far easier to repossess a property in the event of a default.  Only a tiny proportion of lending institutions permit landlords – under the terms of the loan – to offer tenancies of two years or more.  If they do allow them, they are subject to more risk, therefore they increase the rate they charge the borrower (the landlord) who in turn will reflect this in the increased rental that he/she charges the tenant.  I fail to see how this is assisting those looking to rent.  Secondly, longer tenancies will almost inevitably lead to higher rental fees.  Landlords and many agents will try to predict future rent levels and include these in the initial agreement.  People will invariably overestimate potential rent increases, creating rent inflation, thereby reducing the choice and quality of accommodation available to tenants who themselves have financial restraints as to what property they can afford to rent.

The government is pushing to remove, “cowboys and rogue operators”, from the market as, “all tenants deserve a good and transparent service from the landlords and letting agents”.  Quite.  But for every rogue operating as a landlord/letting agent, there is a rogue operating as a tenant.  Many have no official education qualification, but have an unofficial degree (usually masters or PhD) in playing the system and knowing exactly which stunt to employ for maximum effect.  Of course there is credence in the adage that, ‘you get the tenant that you deserve’ but thirty years experience has taught me the hard way that there are a number of people out there who, despite the best efforts and practice of landlord and agent, have no intention of fulfilling their side of the agreement.  I see no charter being proposed to protect the interests of the landlord.

Mr Pickles stated that, “The private rented sector is a vital asset to this country, and plays an important role providing flexible accommodation for those who do not want to buy, or are saving up for a deposit.”[sic].  It is; but I do not believe that increased costs and uncertainty will help incentivise landlords or potential landlords to invest further in the rental sector when the odds are stacked against them.