Sadiq Khan recently announced his draft housing strategy, in which he hopes to use the proposed London Model for renting to improve the private rented sector. Initially, this will bring together tenants and landlords to consult upon reforms, including the proposal for longer term tenancies.
All contract lengths are negotiable between the landlord and tenant and, contrary to popular belief, there is no standard contract for length of tenure.
Interestingly, in 2015, The Deposit Protection Service carried out a survey of 39,855 tenants whose deposits it protects. This survey revealed that an overwhelming 80.1 per cent preferred tenancy agreements that lasted no longer than 12 months. In our opinion, this is still the case and has been further accentuated by Brexit.
We find that most tenants want flexibility within their contracts for a number of reasons; they might be new to an area or particular development; moving in with a partner for the first time; planning to expand their family in the near future; or for many in the current climate, simply unsure of job security.
With many companies looking at relocating staff to different office locations and some even making cuts, Brexit is commonly referenced as a very valid reason for requesting a break clause in a contract. As such, we find that tenants, as opposed to landlords, often want the flexibility of a shorter-term tenancy agreement or break clauses.
Looking at the new tenancies agreed across our London offices between May and July 2017, at the tenant’s request, the vast majority were for an initial period of 12 months – approximately 67 per cent. Only a very small percentage (on average, 3.3 per cent) of tenants were requesting an initial 36 month term. It is important to point out that these three year tenancies are largely corporate lets, where this length of tenancy is a standard request made by the tenant’s employer and a six month tenant break clause will still be requested.
With many companies looking at relocating staff to different office locations and some even making cuts, Brexit is commonly referenced as a very valid reason for requesting a break clause in a contract.
This data doesn’t necessarily reflect the overall length of time a tenant stays in a property, either; our average renewal rates across the same period were 71 per cent. Of those tenancies that didn’t renew, only a handful were due to an unwilling landlord.
For landlords, shorter term tenancies and break clauses are costly. Between tenancies, they have to account for lost rental in void periods, as well as set-up costs like repairs, cleaning and inventory check outs. A long-term tenant provides stability for landlords, making it easier for them to build a relationship with their tenant, and allowing them to keep track of what is going on.
When it comes to tenancy contracts, there needs to be room for negotiation and flexibility.