October 28, 2013

Phil Rickards is head of BM Solutions


Well I think its official; we’ve left summer behind. As the nights start to draw in and we travel to and from work pretty much in the hours of darkness, it’s certainly starting to feel like winter is closing in. But there is nothing wintery about the mortgage market at the moment as Help to Buy equity loan does its bit to get the new build sector going and with the frenzy that’s followed the early launch of Help to Buy mortgage guarantee, it’s great news that there is certainly plenty to keep us all busy.

With the buy-to-let sector moving very nicely towards a possible £20 billion market for 2013 and BM Solutions on plan to deliver on our commitment to the sector, even my attention has been drawn away from all things buy-to-let in the last couple of weeks.

It would have been easy to miss the Communities Secretary’s proposals for a “tenant’s charter” which would potentially put private renters in a position to demand longer tenancies from their landlords of up to five years.

The new code of conduct will also aim to provide greater transparency around letting agency fee charging, improve the quality and choice of rental stock as well as providing tenants with the flexibility of a longer term tenancy should that be what they want.

Needless to say, I’m very much in favour of any initiative that aims to improve quality across the rental sector. However, sometimes these initiatives can often come wrapped in red tape so it was particularly pleasing to hear a commitment to keep the proposals simple, avoiding a set of complicated rules.

The benefits for private renters craving long term security, such as those with young families, are obvious. That said we need to remember, when committing to a longer term, that this arrangement operates two ways. Committing to a longer term agreement needs careful consideration as circumstances can change.

The potential benefits of longer term tenancies for landlords are also easy to see. It reduces the exposure to potential periods of vacancy between tenants, cuts the cost of having to find new tenants on a regular basis and tenants who live in properties for longer will also be more likely to take greater care of the property.

So all in all, this sounds like a good move but it’s important to ensure that consideration is also paid to the mortgage lender. After all in many cases the rental property will be backed by a mortgage. By reducing  the number of occasions that things go wrong for the borrower, it’s good news for the landlord, and the lender must therefore be in the best possible position in terms of its security. On the whole, the proposals which will include break clauses to allow both landlord and tenant a chance to exit if their circumstances change, look good. But it’s vital, for the ongoing health of the sector, that the proposed code works for all parties concerned. It has the makings of good start!


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