Is estate agent greed hampering tenants' rights?

The lure of annual renewal fees is proving an obstacle to long-term rental contracts

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Greedy estate agents have been blamed for blocking the introduction of longer-term private rental contracts with demands for annual renewal fees.

Campaigners for tenants' right have long called for a shake-up of assured short-hold tenancy (AST) agreements to allow private tenants,which number nine million in the UK, to secure a home for three years or even longer, mimicking the system operated in other parts of Europe.

Landlords have long been blamed for refusing to write longer contracts, leaving tenants living with little stability, because they want the freedom to increase the rent and the opportunity to undertake 'revenge evictions'. Mortgage lenders have also been blamed for placing onerous rules on landlords who take out buy-to-let mortgages to purchase a rental property.

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Agents 'preventing market from evolving'

Many lenders' terms and condition state the longest period an AST is allowed to cover is just 12 months, meaning a landlord could not offer a longer tenancy even if they want to as it would breach the terms of their mortgage.

However, while there are obviously rogue landlords and uncompromising mortgage lenders, Dan Wilson Craw of Generation Rent said estate agents were the ones preventing the rental market from evolving.

Lettings agencies charge landlords for finding a tenant and the work involved, then charge the tenant when they move in.

However, the fees don't stop there as there as landlords and sometimes tenants are also charged a fee for renewing contracts each year with lettings agencies using the end of the contract term to negotiate up a rent, which will bag them more commission in the forthcoming year.

'It is difficult for a tenant to get a three year tenancy because while you have a landlord that likes stability [of rental income] and a tenant who wants stability [of knowing they will not lose their home], the letting agent will want an annual renewal process where they charge a fee and can raise the rent,' said Wilson Craw.

He said estate agents were the 'stumbling block' to a fairer rental market.

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Improving conditions

Other parts of the rental market are improving. Earlier this month, MPs backed a private member's bill that would make it illegal to evict tenants who make complaints about broken boilers and leaking roofs. These types of eviction are known as 'revenge evictions' and means a landlord throws tenants out and gets new ones in rather than fixing the problems in the property.

Earlier this year, Labour leader Ed Miliband made three-year tenancies for those in the private rented sector a key part of his campaign. He wants to make three-year tenancies the norm in the UK and place a limit on the amount rent can increase each year in order to address the cost of living crisis.

Brian Murphy, head of lending at Mortgage Advice Bureau, said there was also good news in mortgage lending as he was seeing an increased appetite for lenders to allow landlords to write longer-term AST.

'The government is encouraging longer term tenure [but] lenders have [typically] allowed six month or 12 month ASTs,' he said. '[Specialist buy-to-let lender] Mortgage Works has changed the terms of its mortgages to allow three-year tenancies and others will follow suit.'

Nationwide also allows landlords to write longer-term tenancies under its buy-to-let mortgage terms.

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