Nationwide allows long term tenancies on buy-to-lets

Posted by Arron Dickens in Mortgages on 28 June 2013 - Arron is a Product Manager at checkmyfile

According to Shelter, one in five families now rent instead of buy a house, and these families would obviously like greater security when choosing a rental property. Usually landlords with buy-to-let mortgages have only been able to offer tenancy agreements of between 6 and 12 months, but Nationwide is now planning to allow its buy-to-let borrowers to accept extended tenancy agreements of up to three years.

Campbell Robb of Shelter says, "This news is welcome recognition, as six- or 12-month tenancies just aren't working for England's nine million renters. With two-thirds of renters saying they would like the option of staying in their home long-term, it's encouraging that Nationwide is leading the mortgage industry to help make renting more stable. We look forward to other mortgage lenders following suit.”

Nationwide will offer the deals through its Mortgage Works arm, responsible for all of the companies buy-to-let lending.

Richard Napier of Nationwide says, "The private rental sector has grown and changed phenomenally over the last few years, with rising numbers of families looking to rent. We want our buy-to-let customers to be in a position to be able to meet the changing needs of the market."

Although this appears to be a great step forward by Nationwide, it is unclear how many landlords will actually move to offer such long term contracts to tenants. Longer leases may improve income continuity, but it may also make it harder to get rid of tenants if they become a problem, or if circumstances change and the property has to be sold.

The rights of tenants under a tenancy agreement are strongly enforced; if the landlord wishes to evict a tenant within the fixed term he will need to apply to the court for a possession order. Before applying to the court he must first serve the tenants with a correctly written notice specifying the grounds the landlord has for regaining early possession.

This could cause potential problems for the mortgage lender also. If the landlord falls behind with mortgage payments, the mortgage provider will need to have then tenant removed, before the property can be repossessed. This is likely the reason why mortgage providers have been reluctant to allow long term tenancy agreements to be signed on buy-to-let properties.

Last year, the National Landlords Association (NLA) said it did not think longer tenancies were necessary, as its research showed 46% of UK tenants had lived in their current rental property for at least four years.

Chris Norris of the NLA says, "The current Assured Shorthold Tenancy (AST) provides for those who require both shorter-term and longer-term tenancies with the agreement changing to a rolling-month contract after the initial period has passed”.

Clearly there is some debate within the industry as to the need for the changes made by Nationwide; but if landlords are willing to offer longer term contracts, it would certainly aid families looking for a level of stability not currently available in the rental market.

Arron Dickens is a Credit Analyst at checkmyfile and has a Bachelor of Arts degree in Business Administration and is an Associate of the Institute of Credit Management. He can be contacted at

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