Nationwide’s buy-to-let mortgage wing has extended the maximum tenancy period it allows landlords to offer, from one year to three.
The move puts The Mortgage Works, Nationwide’s buy-to-let arm, out of step with its competitors, with some commentators suggesting that it could signal a widespread change in the maximum tenancy periods offered by all buy-to-let mortgage lenders. The move comes in the wake of calls from housing charities for tenants to be offered longer contracts.
Although the change currently only affects customers of one lender, it seems that landlords will have to grapple with the issue of longer tenancies in the near future. So, if your lender were to allow it, should you offer three year contracts?
Should I offer longer tenancies?
There is a number of potential advantages to offering longer tenancies. The first of these is stability. You know that you will not have to go through the rigmarole of finding new tenants in a year’s time, and you know that theoretically, your property will be filled for a longer period. Minimising void periods is one of the most important tasks facing any landlord, and offering longer tenancies is one way in which you might achieve this.
Longer tenancies also allow you to conduct more accurate financial forecasting. If you know how long your property will be filled, and at what rate, you can get a better hold on your finances. This advantage alone may be worth sacrificing the opportunity to raise rents more frequently.
What should I do if I offer longer tenancies?
If you choose to offer longer tenancies, there is a number of steps you should take to ensure that they go off without a hitch.
The first and perhaps most important consideration is that of regular checks. There is no sense in leaving the property un-inspected for three years. Instead, arrange in advance with your tenant to conduct a check at least annually. This will help you to ensure that the tenants are treating the property properly, and that you can attend to any niggling problems before they become more major.
The second issue is rent. A longer tenancy obviously means that the rent will be fixed for a longer period, and you may therefore think about adjusting the price accordingly. You might wish to take into account projected inflation rates when doing this.
Finally, though, you should remember that although Nationwide has extended the tenancy period it allows landlords to offer, most lenders have not yet followed suit. You must check with your mortgage lender to determine the maximum length of tenancy you can offer, in order to ensure that you continue to operate within the terms of your buy-to-let loan.