The government has recently commenced a consultation process with the aim of ‘Overcoming the Barriers to Longer Tenancies in the Private Rented Sector’.
The majority of private rented homes are owned by individual investors who have been drawn to the sector by the easy returns, lack of oversight and flexibility to liquidate the asset when cash is required.
Controls are being introduced to ensure that ‘rogue’ landlords comply with reasonable standards of care and safety, as well as ensuring that the Assured Shorthold Tenancy (AST) is fit for purpose.
ASTs allow a minimum fixed-term tenancy of six months and are the most common in use across the sector. They were an ideal tenancy for buy-to-let landlords: simple and convenient to operate, while leaving control of the length of the lease entirely with the landlord. As the sector grows and more young families and retirees choose to rent, security of tenure is becoming a major issue. The government is looking to address that.
The new entrants to the PRS market are the build-to-rent landlords. BTR is all about steady, long-term ventures, usually backed by institutional investment, occupying entire blocks of flats with on-site management services.
Fizzy Living is one such company, assisted by a sovereign wealth fund and a housing association, with 700 flats under management and a further 300 under construction.
BTR is all about building a community in each of its assets, where tenants are customers, long-term relationships are good and steady rental growth is expected. BTR welcomes longer leases, and at Fizzy we have been offering three-year ASTs with tenant-only break clauses for some time.
Rent reversions are agreed at the start, so both sides know exactly what they are signed up for. So far so good, but the landlord must be able to recover vacant possession in the event of unpaid rent, damage to the property or antisocial behaviour. Too much government control and the investors will move on.