The accidental landlord: why three-year minimum rental contracts plan could backfire

Have I been holding my breath for the last few months? It feels like it. I have been waiting to hear what the Government will do next in its attempts to kill off small private landlords — and now we know.

It has announced new plans to force us to give tenants minimum three-year contracts, which it thinks will give people who rent homes more security.

In theory this sounds like a good idea, doesn’t it? I mean, it’s understandable that tenants, especially families, want to put down roots and most landlords — myself included — would love tenants to stay for three years or longer. Re-letting properties is time-consuming and if you use an agent it can cost an arm and a leg, too, so of course we want tenants to stay as long as possible.

However, locking landlords into three-year tenancies significantly increases the risk in what is already a very risky business, so if the Government pushes ahead with this proposal, my hunch is that there will be fewer rental homes available and rents will rise.

At the moment, a landlord only has to issue a minimum six-month contract, at the end of which they can give their tenants two months’ notice to leave, no questions asked.

If we are forced to offer tenants three-year contracts and the tenants turn out to be bad ’uns, we will have to get rid of them using the Section 8 eviction process, which can be a nightmare.

Tenants have the right to contest an S8 eviction in court and the legal system is straining under the weight of its workload already.

This eviction process can take months or even years, during which many landlords lose the will to let. You only have to watch one episode of TV’s Nightmare Tenants, Slum Landlords to feel the pain of someone who has been through this process.

Unless the Government reforms the S8 procedure in tandem with the introduction of longer tenancies, landlords like me will be much more wary when accepting new tenants.

I would even go as far as to say that many low-waged, self-employed, young and more vulnerable tenants won’t be able to find landlords who will accept them.

At the moment, I often rent rooms to tenants who fail credit checks if I like the look of them because, at the end of the day, I know that if they let me down and don’t pay the rent I am only stuck with them for six months.

I will even allow tenants who have failed credit checks to rent entire properties, not just individual rooms, as long as they can provide guarantors, but I wonder how many guarantors will be prepared to sign three-year contracts?

I currently have a low-waged tenant whose employer agreed to act as her guarantor but the employer insisted at the outset that we inserted a clause into the contract stating that her guarantee would end after 12 months because she didn’t want to be locked in for any longer. So if the shortest let I could offer this tenant was three years, I would have been forced to turn her away.

In future, landlords like me will be far more cautious about accepting these sorts of tenants who pose a greater risk, so while longer tenancies might help some, they could be extremely damaging to those renters who are already struggling to find accommodation.

And three-year tenancies will almost certainly kill off the true “accidental” landlords, those who just want to let their homes for a few months, say because they have taken a temporary job in another location, or because they can’t sell but need to move. For them, I can already hear the bell tolling.