Tenants Charter – Mr Pickles, have you gone completely mad?

Open Letter to Mr Eric Pickles – Communities Secretary – re Tenants Charter

Dear Mr Pickles

Have you gone completely mad?

I am reading in The Times Newspaper today that you are to announce a “Tenants Charter” which will allow tenants to demand two to five year tenancy agreements.

Do you realise that most buy to let mortgage borrowers would be in default of their mortgage contracts if they were to offer tenancy agreements with fixed terms longer than 6 or 12 months?

Do you realise that most modern leases (e.g leasehold flats) contain conditions on subletting not exceeding 12 months in term?

There is a very good reason why mortgage lenders have these conditions in their mortgages. It is because it is so difficult to obtain possession when a tenant reneges on a contract. Bad payers are regularly getting away with up to 5 months of rent free living. Theoretically a landlord can apply to obtain possession by serving two weeks notice once a tenant is two or months in arrears on rent. However, after that 10 weeks has expired it can take several months to get a Court date. Even when a possession order has been granted it then takes several more weeks before bailiffs can be appointed to enforce the order. If you want landlords and mortgage lenders to provide greater security of tenure to tenants then you are going to have to sort out the possession rules for landlords first.

Section 21 of the housing act transformed the UK Private Rented Sector which was in rapid decline until the 1988 act was introduced. Forcing landlords to offer long term tenancy agreements will force the PRS back into the dark ages and reduce incentive for further investment into the sector.

Does Government not recognise the need for a healthy PRS?

Does government not realise that a huge sector of the working population rely on the housing flexibility the PRS provides in terms of job mobility?

Do you have any idea of how your speech today could destabilise the Private Rented Sector?

I totally understand that good tenants, particularly young families with children of school age, need a fair deal and it cuts both ways in that most landlords want good tenants to stay long term. It makes economic sense for landlords to have quality long term tenants,

So why have you not even considered promoting the Deed of Assurance?

Perhaps you are unaware of the effectiveness and simplicity?

A Deed of Assurance is a document in which a landlord promises to pay an agreed level of compensation to a tenant if possession is obtained within a given time period. 

A Deed of Assurance is a relatively simple legal agreement which sits alongside an Assured Shorthold Tenancy Agreement “AST”. It is a separate agreement between landlord and tenant which does not affect the landlords rights to serve notice or to obtain possession, therefore it does not affect the rights of a mortgage lender either. However, it does offer tenants peace of mind.

From a tenants point of view, a Deed of Assurance provides far more flexibility than a long term tenancy because they are only tied in for 6 months and can then move on if they need to. What a Deed of Assurance offers in addition to an AST is peace of mind.

The compensation amount offered by the landlord is negotiable but obviously the idea is to agree something which is meaningful to both parties. For example, I offer to pay anything between £1,000 and £5,000 compensation if I obtain possession within the agreed period, providing the tenancy conditions have been observed impeccably by the tenant of course. If tenants fail to pay rent on time or breaches other contractual terms within the tenancy agreement their right to claim compensation for being evicted during the Deed of Assurance is forfeited. I have been offering a Deed of Assurance to my tenants for a few years now and I am delighted to report that my relationships with new tenants have never been better.

I do not expect a reply from you Mr Pickles but I do hope you will consider the implications of acting on the advice of the people who have been influencing you up to this point.

Yours sincerely

Mark Alexander

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