03 Aug 2018

On 2nd July 2018 the government published a consultation paper with the title shown above. The paper notes the following measures that are being introduced, namely:

  • banning letting fees to tenants and capping tenancy deposits to ensure that tenants have more money in their pockets; 
  • insisting that all landlords are members of a redress scheme so that tenants have quick and easy resolution to disputes; 
  • ensuring all letting agents are registered and are members of a client money protection scheme to provide assurance to tenants and landlords that their agent is meeting minimum standards.

However, the government takes the view that “the change in size and make up of the private rented sector has led to growing need for longer, more secure tenancies than the minimum six months offered by the assured shorthold tenancy regime”.

Research indicates that “The average length of residence in the private rented sector is 3.9 years in comparison with 17.5 years in the owner occupier sector and 11.3 years in the social sector. However, 81% of tenancies granted are for an initial fixed term of 6 or 12 months.” In addition “41% of households in the private rented sector do not expect to move into home ownership. 38% of households in the sector are families with dependent children who are likely to want greater security to provide stability for their children in school, and 9% of households in the sector are over 65”.

The government’s initial view is that:

“It is vital to strike a balance between providing tenants with security whilst ensuring that landlords are able to recover their property if needed. It is also important to balance the desire from certain tenants (e.g. families) for greater security with the desire from other tenants (e.g. students and younger households) for flexibility. A longer, more secure tenancy does not mean that tenants should be locked in with no means to leave if their circumstances change. The factors that need to be considered are: 

  1. The length of the tenancy (or the initial fixed term)
  2. What happens at the end of the fixed term
  3. The grounds on which a landlord can serve notice (which might be different at different points in the tenancy)
  4. The length of notice the landlord must give; and e. Rules about rent increases.”

Government produced a model assured shorthold tenancy agreement in September 2014 which has been periodically updated. It is not clear how much this has been adopted by the industry. It is suspected that it is not much used.

However, building on the model tenancy agreement, the government’s view is that the necessary model for longer term tenancies is as follows:

  • A minimum three year tenancy but with an opportunity for the landlord and tenant to leave the agreement after the initial six months if dissatisfied. If both landlord and tenant are happy, the tenancy would continue following the break clause.
  • Following the six month break clause, the tenant would be able to leave the tenancy by providing a minimum of two months’ notice in writing.
  • Landlords can recover their property during the fixed term if they have reasonable grounds. These grounds would be in accordance with the existing grounds in Schedule 2 of the Housing Act 1988 and would include antisocial behaviour and the tenant not paying the rent. 
  • Additionally, there would be grounds which covered landlords selling the property, as is possible in the current model tenancy agreement, or moving into it themselves. These grounds would require the landlord to provide at least two months or 8 weeks’ notice in writing.
  • Rents can only increase once per year at whatever rate the landlord and tenant agree but the landlord must be absolutely clear about how rents will increase when advertising the property.
  • Exemptions could be put in place for tenancies which could not realistically last for three years, for example, short term lets and student accommodation.

Government wants comments on these proposals, including the length of suggested notice periods, rate of rent increases and overall practicability.

Government is also asking for views on implementation of its proposals. These range from legislation (i.e. to compel the grant of longer tenancies), through to tax incentives, kitemarks/quality schemes and education.

The consultation document contains brief comparisons of the effect of current forms of ASTs and the proposals in the consultation on possession, notice periods and rent review. It also sets out the grounds upon which landlords in Scotland can obtain possession now that residential tenancies there are generally indeterminate. 

The consultation period ends on 26th August 2018.