Are Long-Term Lets Still The Best Option For Tenants?
4 Feb 2021
We will explain why long-term lets are a great option when stability is your top concern, and how to find a flexible long-term tenancy in the market.
The length of tenancy usually requires landlords to give it more thought than tenants. They must mull over the stream of income, management, and maintenance concerns before taking a decision. Meanwhile, the common advice for tenants is to choose a long tenancy to minimise the cost.
Is it really that simple? Are there any hidden benefits (and downsides) of a long-term let that may make all the difference for some people? Is there any way to limit the disadvantage of a multiyear lease while still enjoying its full benefits? This post is going to help you with all of that.
- What Is A Long-Term Let?
- When Do You Sign A Long-Term Let?
- Should You Sign A Long-Term Lease As A Tenant?
- What Is The Longest Tenancy Agreement You Can Have?
- Where Can You Find Flexible Long-Lets?
There is no universally accepted definition of a long-term let, but typically long-term tenancies are associated with accommodation that last for an extended period of time. In the UK, it is usually at least 12 months.
What kind of tenancy renters sign depends on the planned length of stay in the property. If you have a permanent job nearby and want to stay in the area for a long time to start a family, a long-term let is obviously your first choice. There are also purposes that short-term lets make more sense, even though they are more expensive (usually 30%)1. For example, you may need a temporary rental while seeking for a permanent home to buy or while you're finalising the purchase process.
Long-term rentals bring many benefits while posing some risks and inconvenience to tenants, just like they do to landlords. The difference is that you must see it from the perspective of a person looking for a place to live, not an investment with potential financial benefit.
Benefits of long-term lets
A more stable and secure rent
Signing a tenancy agreement with a long fixed-term is a goal of many tenants. It ensures long-term stability as they don't have to look for and move in a new home anytime soon. This is crucial if you intend to stay in the same area for many years to come and you're happy with the place you're renting right now. No one will ever know they could ever compete with other renters to find a similar place, especially in high-demanding areas.
People living with their families understand this point the most. With a long-term let, they can have peace of mind and start planning for the future with a major issue having been resolved. Families also have better access to amenities in the areas such as doctors and schools, thanks to a more permanent residence.
Improve credit rating
A recent study done by Experian, one of the three biggest credit bureaus in the UK, has found out that 96% tenants in the private section (PRS) weren't aware of the opportunity to improve credit score by paying rent on time2. The most logical reason for these shocking figures is that it has not been possible until recently. Most people have always known that mortgage payments do help build up the credit score if they can make those payments on time, but they don't know that it's now true for tenants and rental payments as well.
In March 2019, Equifax (another name of the big three) started collecting information about rent payments from CreditLadder, the biggest rent reporting platform in the UK3. Experian started doing this with The Rental Exchange scheme in October 20184. Every time a renter makes payment via CreditLadder, this information is shared with Equifax or Experian and then registered to the renter's credit file.
With a stable long-term let, tenants can have another way to build up a strong track record in addition to buying stuff with their credit cards or taking out a loan. Each rental payment can serve as a proof for your income and creditworthiness, showing your ability to borrow and repay loans in the future.
This benefit doesn't apply to customers of TransUnion, however, as this credit reference agency hasn't joined the innovative. Canopy is another rent reporting platform that also processes and verifies rent data like CreditLadder, but it only sends the information to Experian for now5.
Strengthen the relationship between you and the landlord
A long-term let gives both sides more time to get to know each other, build trust, and develop a connection between tenants and landlords. You don't need to consider your landlords as a friend to have a healthy relationship and enjoy many benefits from this.
Once the landlord can tell for sure that you're a responsible tenant during a long tenancy, they will respond more quickly and in a better mood to your maintenance and repair requests. They are less likely to do so if you're just a new tenant who keeps bothering them with small demands, even if these tasks fall rightly in their landlord repairs obligations.
A good tenant-landlord relationship in a long-term let also raises the chance of them acting more forgiving in an emergency, such as when you have late payments. A longer history of paying rents on time will come in handy when you need to defer a payment for a few days, for example.
Without enough time for the landlord to know whether you're a trustworthy tenant who also cares about the property, none of those would happen. The advantages of such a relationship also extend beyond the tenancy. If you ever want to move out, your landlord could do a favour and write you a reference. This is an important thing to have when you have to compete against others in a crowded rental market. A sincere recommendation from an old landlord can go a long way in helping you snatch a good place.
Save removal costs
Moving costs, especially when you have a lot of stuff, can be a big chunk of your money if you move between tenancies too often. According to CompareMyMove, an average removal company in the UK will charge you about £1,181 if you currently live in a 3-bed house and want to move to a new place 50 miles away6. These removal costs include professional services of dismantling and reassembling your furniture. Doing it one time is already costly, now imagine how strained your budget is going to be if you have to move every 12 months when the tenancy has expired.
Long-term tenancies are usually cheaper because landlords want to encourage tenants into a longer-lasting agreement, meaning a stable income for them in the long run. In other words, you have better bargaining power as landlords are willing to discount some rents in exchange for a steady stream of revenue.
Know in advance rent increases
In addition to a cheaper rate, tenants are also aware of rent increases when signing a long-term let. Though it's common for landlords to increase rental prices after each year, a multi-year tenancy agreement makes sure you aren't vulnerable from a surprise surge in rent that can wreak havoc on your budget at an unwelcome time.
In assured shorthold tenancies, landlords can't raise the rent during a fixed-term period unless the tenants agree to it or the contract has a rent review clause. Even with a review provision, a long-term tenancy agreement usually still sets out when landlords can start to increase rent, how they should notice you, and the method for calculating the new rent (such as a constant annual increase to an agreed limit)7.
Downsides of long-term lets
The main disadvantage of a long-term tenancy is the inflexibility coming with it. As most terms and conditions have been agreed for a long period, both landlords and tenants will find it cumbersome to propose an adjustment to the contract, or even end it halfway.
A long-term let will become a huge barrier when your career suddenly is in flux. If your life doesn't turn out like how you planned when signing the tenancy agreement, you now have another issue to overcome. A multiyear agreement means you are willing to make a serious commitment to stay in that place for an extended period of time. When your family needs a larger space for a new member, or when you find a much better job in another area, your original plans are going to get shelved, including your long-term let.
Such a big change doesn't always come from a surprise life event, but sometimes when you need to make adjustments in your budget. Assume a few months into a long-term let in a new city, and you find out your budget is not going to work. You need to scale back on expenses, and the bad news is you need to pay less for rent, at least temporarily. A long-term let will narrow down your options and force you into difficult decisions in situations like that.
Another thing of long-term renting that could be either a blessing or a nuisance is your neighbours. If you're unlucky enough, you can have to be stuck with annoying neighbours who throw a party every weekend or always block your driveway. You can complain about those disputes to authorities, but this is not always a guarantee. A multiyear tenancy may make people feel trapped and hopeless in those circumstances.
Assured Shorthold Tenancies
An Assured Shorthold Tenancy (AST) is the most common legal category of recent residential tenancies in England and Wales, which has no legal limit on the duration. These agreements usually start as a fixed-term tenancy with a defined duration (typically between 6 months and 3 years). At the end of this fixed term, the landlord and the tenant can agree to a new fixed-term agreement, end it without extension, or let it become a periodic tenancy. Periodic tenancies don't have a predefined end date, and they keep rolling on a monthly basis until either the tenant or the landlord ends it8.
Private Residential Tenancies
In Scotland, Private Residential Tenancy (PRT) agreements are the main type of all new tenancies and don't contain any definite tenure9. These open-ended tenancies make it harder for landlords when they want tenants to leave. They also don't have any legal limit in how long they can last.
Build To Rent (BTR) properties are where you can find the best of both worlds - the security of a long term tenancy and the flexibility of some conditions. Most BTR investors, corporate landlords, want to recoup their investments by focusing on long-term residential tenancies. Break clauses that can be triggered only by tenants are also common on BTR contracts. They provide tenants the opportunity to end a tenancy when their personal circumstances change and they need to move to a new place, such as relocating for work or when their financial situations are no longer sustainable.
Long-term lets are still the more viable choice for tenants when they are looking for stable and secure rental properties. Unless life hits you with a massive surprise, a multiyear tenancy still yields more benefits in the long run. Thanks to newer schemes like BTR, you can now have even more options for long-term lets. These properties help tenants secure a stable tenancy while still giving them some flexibility when they ever need to end it.
Go to the search section in our site, BuildToRent.io, to find out which BTR properties are available at the moment.
- Endsleigh Insurance, Short term tenancy vs long term tenancy↩
- Credit Ladder, Ultimate guide: credit score building through rent↩
- Which?, Equifax to include tenants’ rental payments on credit reports – can it help you get a mortgage?↩
- Experian, The Rental Exchange↩
- Compare My Move, Compare Removal Costs↩
- Shelter, Assured shorthold tenancies↩
- Kinleigh Folkard & Hayward, Deciding on the length of tenancy↩
- Scottish Government, Private residential tenancy: information for tenants↩