Pro's and cons of offering a long fixed term?

Nobbie1967

My current tenant is moving out and has said she knows someone who would like to move in, but would like some security of tenure. I am considering offering a 3 year fixed term, but wondered if there were any pitfalls in doing this. I own the property outright, so no mortgage issues.

I'm also considering freezing the rent for the 3 year term, presumably I can just put this in the AST and this protects the tenant from me changing my mind (To reassure the tenant).

I don't think I've read much about longer fixed terms before, so wondered why they're not more common as this seems to be a win/win for tenant/Landlord?

I'm in England

benjus

Which part of the UK are you in? Assuming England/Wales...

Unless you actually put something in the tenancy agreement to allow rent changes, you can't change the rent during the fixed term anyway.

What if the new tenant turns out to be a nightmare? You'll have to wait for them to do something sufficient to warrant a Section 8 notice to get rid of them?

What if your circumstances change and you want to sell the property? With a tenant in place you'll only be able to sell on to another landlord, and the property may be worth less without vacant possession.

tbh I think that long term tenancies are unpopular at least as much due to tenants' preferences as to landlords'. Lack of security of tenure has a flip side which is flexibility to move elsewhere without the hassle of selling a property and buying another one. As the culture in this country is to aim to buy a property as quickly as possible, many people view renting as a temporary, transient thing and don't want to view it as a long term thing.

Gonzo1987

If the agreement is over 3 years it becomes a deed.

Most of the time tenants don't want anything longer than a year. Will you be including a break clause?

Nobbie1967

Gonzo1987 wrote: »

If the agreement is over 3 years it becomes a deed.

Most of the time tenants don't want anything longer than a year. Will you be including a break clause?

I'll certainly consider adding a break clause as committing yourself for 3 years as a tenant might be a bit much. Any ideas on type of break clause?

Pixie5740

What about a 6 month break clause as you should have the measure of each other by then?

I would also talk with the tenant and spell out what it means to have a 3 year fixed term i.e. if they want to move out early they will still be liable for rent until the end of the fixed term.

mgarl10024

I guess I'd ask myself why I wanted to do it in the first place?
- It limits your options for getting a bad tenant out.
- If rent prices soar it has limited your options to raise them.
- If your circumstances change, it has limited your options there too.

The only reasons I could see for doing it was
- If your tenant was prepared to pay over the market rent (a bit like them freezing their energy prices - they are paying more now with the idea that they go up and they win later on)
- You value the stability of knowing that you've sorted it for 3yrs with reduced hassle (however, if the tenant decides to move are you going to try to keep them there if they don't want to stay, or will you be prepared to take on a new tenant if they find them? etc.).

Is there a good market for tenants where you are? If so, I'd be considering why you'd want this one in particular if it required you to limit your options in so many ways.

(Also, if mortgage companies forbid it, as many do, that is usually a sign that they perceive it as risky...)

pinkteapot

Unless the tenant is insistent on such a long term, could you not just meet them and explain that you own the property outright, you currently have no plans to sell it - basically that you can't promise anything of course but there's no reason why they can't have the property long-term.

Then give them a standard fixed term and say you're happy to go onto a rolling periodic tenancy once it runs out (unless they particularly want a second fixed term afterwards).

Experienced tenants can normally spot the more honest landlords when they meet them.

Pixie5740

pinkteapot wrote: »

Unless the tenant is insistent on such a long term, could you not just meet them and explain that you own the property outright, you currently have no plans to sell it - basically that you can't promise anything of course but there's no reason why they can't have the property long-term.

How many times have tenants heard that before only to find a "for sale" sign being put up 2 months after moving in? Maybe this tenant has been burnt before.

G_M

Pixie5740 wrote: »

What about a 6 month break clause as you should have the measure of each other by then?

.

Would the break clause be a one-time only? ie only excercisable at 6 months, or ongoing ie excercisable at any time after 6 months?

In reality what is the difference between

* a 3 year term with a 6 month break clause and
* a 6 month term followed by either a 2 1/2 year term, or 2 1/2 years on periodic?

Put simply, a 3 year term

1) gives both sides security (LL is guaranteed rent; tenant is guaranteed a home
2) removes any flexibility (LL is stuck with the tenant; tenant is stuck with the property)

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

Pixie5740

I was thinking of it being a one time thing exercisable at the 6 month mark.

G_M

My Q was more directed at the OP as something to consider. Wasn't haing a go at you pixie, just following up your suggestion with further thought-provoking Qs......

:kisses3: