This post is written by Karl Deeter in a personal capacity.
I help to manage about 20 tenancies in different buildings, and lately we have been operating a new agenda which is very simple.
We offer leases of between 2 and 5 years. A two year lease comes with no rent review, a five year lease comes with a review in year 3 with a contractual clause that the rent cannot go up or down by more than 10%.
According to the commentary on what tenants want you’d think that people would be jumping at the bit for such terms and conditions? Think again, it has almost universally fallen on its face.
While there are people affected by rising rents, what they don’t seem to want is the time commitment that goes with a lease of longer than one year. Why is this? What is the trade-off?
We do ask why it doesn’t suit and get different answers, some people want to buy a house or don’t know if the will stay in their current job, others just ‘prefer’ one year leases.
The downside is that this exposes them to every chicanery possible within the 2004 Tenancy Act and the end result is that their rent can easily be revised upwards if they choose to stay, but you can’t have it both ways, because the rationale is that fixed prices applying to a fixed lease are dictated by the duration of the lease.
My view (which is based on a very small sample) is that people want rent certainty should they choose to stay, but they don’t want to make that choice until after they have decided that it suits them and this points towards an inherent preference for unilateral decision making which is unfair to both sides.
The outcome is that we accept less than the maximum price offered, and the people who are willing to make longer commitments benefit from it, but they are rare.
Obviously there is a middle ground, but the regularity of people saying ‘no’ to longer leases, in particular at a time when so many show up for viewings due to scarcity is odd? It’s an over simplification to say it’s all ‘want their cake and eat it’ but at the same time, the nuanced answer doesn’t appear to be too far away from that.