Eric Pickles' move to allow renters to demand longer tenancies will leave many landlords at odds with their mortgage lenders.

Communities secretary Eric Pickles, proposed that a Tenant’s Charter will give tenants in short term tenancies, the power to get longer term contracts from 2years to possibly five year contracts.

The danger of this is that many landlords may be put into the position of violating their buy-to-let mortgage contracts. A large percentage state within their terms, that tenancies should be term short and no longer than one year.

Pickles, who unveiled his “tenant’s charter” at the Conservative party conference said: "Families deserve stability for their children and all tenants deserve a good and transparent service from their landlords and lettings agents.

"Today's proposals will raise the quality and choice of rental accommodation, root out the cowboys and rogue operators in the sector and give tenants the confidence to request longer fixed-term, family-friendly tenancies that meet their needs."

Apart from Paragon which does not stipulate a length of tenancy in its terms, only one other Building society, permits landlords to hand out three-year tenancies.

The majority of lenders prefer short-term contracts, simply because they feel that this way it is far easier to repossess properties if landlords are unable to meet their buy-to-let repayments.

 

A major buy-to-let building society said: "If a buy-to-let borrower offers a tenant an agreement lasting more than 12 months they would be in breach of our terms and conditions.

"We have a range of sanctions, such as refusing to offer further borrowing to a landlord who has breached their terms in this way. But we aware of  the measures being proposed and it is something we are keeping a watching brief on."

It is obviously a major concern to landlords and lenders alike as mortgage contracts will have to be re-written to meet the Governments proposed demands. However there is a bright side, longer term tenancies will certainly help reduce periods of properties being empty.

Housing Charity Shelter’s chief executive, Campbell Robb, said: "This is a welcome step in the right direction, and ministers now need to consider how to make longer tenancies a real choice for the families desperate for a more stable place to live."

Pickles said "Longer tenancies will give families greater certainty and security, especially for those with children at school, and reduce costs for both tenants and landlords who will not have to pay letting agents to arrange frequent contract renewals."

The proposal states that the government will set out the responsibilities and rights of both landlords and tenants and introduce them into a model tenancy agreement, he says he does not intend to change the existing legal framework for the rental sector.

Renting from private landlords has doubled since 1999, the number of renters was 2 million and the figure is now 3.8 million and includes 1.3 million families. The majority are AST’s “assured shorthold tenancies” of six to 12 months duration.

In a recent poll it was found that the older renters will welcome the “tenant’s charter” 35 + years old, younger renters want the flexibility of a short term agreement.