Contracts, not silly rules, are the better form of rent regulation

Something often forgotten are the lessons from history, in recent debates about spiralling rents and other such issues, the one thing that almost never gets mentioned is the power of contracts.

Instead we talk about ‘rent freezes’, ‘rent certainty’ and many other such buzzwords but we overlook the obvious, which in this case is something that goes all the way back to the Land Act of 1881 which Irish people struggled so hard to obtain.

It is the idea of ‘dual ownership’, and it celebrates a 135th year birthday this year.

Dual ownership is the idea that two people can ‘own’ something, albeit in different ways, the idea was also key to Gladstone’s appeasement of the Irish Land League at the time, it was also good idea which has stood the test of time.

Land courts determined fair rents and ‘fixity of tenure’ (one of the ‘three F’s’) was guaranteed by the power of the contract which, as long as the rent was being paid, meant that you couldn’t be evicted.

That power has endured, even today we know of no instance where a person within a contract on a property has been forced to leave (with legal backing), because it normally only happens to people under what is known as a ‘Part IV’ tenancy which is less formal than that which exists under a lease contract.

What does it mean? It means a few things, first is that long leases can fix most of the malaise in our rental market, but that means people actually have to sign up to them. Something which thus far isn’t happening.

Second is that you can contractually allow for ‘fair rent’ (another of the ‘Three F’s’), by stating in the contract that the reviews will happen at a certain time and with certain limits, this is something I have personally used to great success and the recipe is both simple, and as follows…

You take out a five year lease, there is a review at the end of year 3 where the rent changes to whatever the prevailing price is but with a limit that isn’t more than 10% up or down (because prices fall as well as rise). This gives the landlord certainty of income and the tenant certainty of price and tenure.

It would solve a huge amount of the problems we have, it already exists, and it wasn’t looked at. It would appear that the gaping blind spot in this entire debate is historical fact, common sense and dual responsibilities by both landlords and tenants – we should be discussing this rather than talking about every other alternative.

Or perhaps we’ll do the right thing, but only after we exhaust every other alternative first?

Comments

  1. Ian Fitzpatrick

    Sounds a good idea to help bring about a mature and settled rental market. Do you see any drawbacks ?

    • Karl Deeter

      Hi Ian, there are some, if there were long leases then most likely the best property and locations would be locked out for many new entrants to the market, you see this in places like New York or even in Paris where only the people who were there forever seem to be able to live in certain desirable neighbourhoods. There are other problems such as the cost of breaking the contract which can fall on the renter, issues of worker mobility and many other things but in general I’d still see it as a good advancement.

  2. Good idea Karl, are the long leases that are common in France and Germany flexible to allow regular sale of the property

  3. Great article Karl. Thanks for that

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