36 month ASTs should be the new normal

Robyn Hall

June 18, 2013

The condition, which would be written into the loan agreement, would stipulate that a requirement is placed in the tenancy agreement that regular annual rent reviews would be undertaken to keep rent levels in line with local market rents.

Lawrenson, who writes from www.lettingfocus.com, said: “Our work advising mortgage companies shows this approach would ensure that where a landlord defaults on mortgage payments and a receiver of rent has been appointed lenders and borrowers positions would still be protected because the lender would be able to continue to receive a market rent on the mortgaged property until either the tenant vacates or the term has expired – at which time the property could be sold into the market to clear the mortgage debt.”

This approach would allow the tenant to remain in the property for a longer period providing they continued to pay a market level of rent to the receiver.

Lawrenson said the current situation sees many lenders looking to take vacant possession which is why they do not want to accept tenancy agreements of longer than 12 months. If the period of vacating the property is a drawn out process there is no mechanism in place to increase the rent accordingly.

The receiver of rent, which acts for both the lender and the borrower, would have the authority to increase the rent to ensure it remained competitive and work with both parties to reduce the arrears on the mortgage and keep the tenant in the property.

Initial fixed terms of up to 36 months would appeal to families with children of nursery or school age and to the retired.

Lawrenson said: “Of course we are fully aware that many landlords would not want to write initial fixed terms longer than 12 months for a variety of good reasons. And many tenants do not want them either for a variety of other equally valid reasons.

“But allowing landlords the possibility and the flexibility to issue tenancies with fixed terms up to 36 months would be of interest to many landlords who already know and trust a tenant and to those tenants who would like the certainty of remaining in a property for a longer period of time than just a year.”

And he added: “There is certainly increasing pressure on mortgage companies to allow landlords to offer longer term tenancies.”

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