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Former president of ARLA Propertymark, Greg Tsuman, has warned that the implementation of the Renters’ Rights Bill is already causing problems in the private rental sector (PRS).
According to Tsuman, there has been a notable hike in the number of early surrender agreements as tenants believe the new rules are already in place, meaning they can leave their tenancies just by giving two months’ notice.
Tsuman said: “By getting rid of fixed term tenancies, tenants will be able to leave by simply serving two months’ notice, whilst landlords will have to give a valid reason if they want their property back. Until the law changes, the only way to end a fixed-term agreement is through an early surrender agreement.”
An early surrender agreement enables a tenant to quit a fixed-term tenancy (where there is no break clause) without paying rent for the remainder of the term.
Tsuman comments that he has noticed many tenants already believe that the Renters’ Rights Bill is law, which will make it legal for people to give two months’ notice to end a tenancy, and it is resulting in more early surrender agreements being initiated now due to a misunderstanding of their current legal obligations.
But while the legislation is designed to provide tenants with more rights, Tsuman warns that the Renters’ Rights Bill could lead to more landlords quitting the private rental sector.
He continued: “Because the Renters’ Rights Bill means that any tenant can leave a fixed-term tenancy with two months’ notice, this may give tenants more freedom of movement without any fees, but it will also increase landlords’ costs. This could then push more landlords out of the private rental sector because it is yet another cost they would need to consider, alongside how much rent they are going to charge. This could then lead to fewer properties for tenants to rent.”
Tsuman is urged landlords to consider early surrender agreements carefully before the Renters’ Rights Bill may become law, and to avoid agreeing to them unless there are exceptional circumstances. After all, the fixed term contracts are potentially going to disappear for good in only a matter of months.
He said: “In the meantime, there must be a valid reason why landlords may want to waive their rights before they lose their rights. For example, if a landlord is selling in the future, it may suit their plans to agree to an early surrender agreement. Agreeing to an early surrender increases their risk of getting fined, experiencing loss of revenue, and additional expenses which they may not be able to cover. We have seen tenants turn on their landlord as soon as the early surrender agreement was signed. Once tenants are no longer contractually bound, some may feel emboldened to act unreasonably or even make threats. It’s a good reminder to document everything and, where possible, ensure mutual surrender terms include clauses about post-surrender conduct or settlement of disputes.”
Tsuman is advising landlords who have agreed to the tenant’s request to surrender early, whether a charge is necessary. After all, being pursued by a disgruntled tenant may be more costly than the early surrender charge itself.
He added: “A landlord putting forward an early surrender agreement even if this is financially better for the tenant than holding them to the existing contract, could land them with a significant fine and an inability to recover their costs, and that is the unintended consequence of the Tenant Fees Act.”
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