Legal advice could avoid potential pitfalls in longer-term tenancies

Published: 25/07/2013

The Communities and Local Government Select Committee has recently called on the Council of Mortgage Lenders to promote longer tenancy agreements. The CML’s response in their News and Views states: 'Although shorter-term tenancies are likely to remain the most popular choice for most of those renting, we are continuing to work with lenders to understand the risks posed by longer-term tenancies – and how they can be overcome.’

'There are two key issues for lenders to consider,’ explained Robert Denman, Solicitor and Head of GW LET at Goldsmith Williams, delivering help and advice for landlords. ‘Firstly most current mortgages only allow for tenancies to individuals of up to twelve months so granting a longer tenancy would be a breach of the mortgage terms and conditions. Lenders will need to make changes to their mortgage terms and conditions, in the future, to facilitate longer-term tenancies. Absolutely, in those circumstances the tenant would benefit from greater stability.

The second key issue that arises is the borrower landlord and lender could feel that they have less flexibility when dealing with the property as they are bound by the tenant’s longer-term tenancy.

However, with help and advice for landlords from a specialist landlord law solicitor the borrower landlord could adopt some of the current legal remedies available to retain greater control over their property thus overcoming the loss of flexibility.

The Housing Act 1988 Schedule 2, Part I Grounds 1 and 2 provide mandatory grounds for recovering possession from the tenant. Ground 1 relates to returning owner-occupiers (whose landlord gave notice to their tenants at the beginning of the tenancy about this ground) so they can recover possession on the basis that they intend that property to be their principal residence. Ground 2 is where a mortgagee in possession needs to exercise its power of sale. These opportunities (amongst other grounds) to recover possession could be critical for both borrower landlords and lenders especially if longer-term tenancies become the norm.

Therefore with good legal advice the landlord and lender can retain flexibility whilst the tenant can enjoy greater stability – potentially a win win for all parties.’

Content correct at time of publication

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