Student Tenancies: Early Sign-Ups or Wait for Changes?

As a student landlord, you know that December often marks the start of your preparations for the next academic year. Typically, you'd begin marketing your properties and signing tenancies for a 10- or 12-month fixed term commencing the following September. But this year is different--change is on the horizon. The Renters' Rights Bill 2024 is expected to come into force sometime next year, though the exact commencement date remains unclear. Some say April 2025; others speculate September 2025. In any case, the legislation may significantly alter the landscape of student lettings.

Key Changes on the Horizon

• Abolition of Fixed-Term Tenancies: Under the new Bill, all assured tenancies will become periodic rather than fixed-term from the outset. This raises questions about the traditional student-letting model, where contracts are signed well in advance for a fixed duration matching the academic year.
• Two Months' Notice: Tenants will be able to leave by giving just two months' notice, even if you were accustomed to a fixed term ensuring that students stay the entire academic year.
• Restricted Grounds for Possession: With the removal of Section 21 "no-fault" evictions, gaining possession will rely on specified grounds. This could make it harder to ensure the property is vacated in time for new students.
• Other Requirements: New landlord registration and ombudsman membership will be mandatory, and pets may need to be considered. While these may not be immediate concerns, they could influence how you draft your agreements or structure your letting cycle.

The Dilemma for Student Landlords

Traditionally, student landlords sign up tenants months in advance--often around now--to secure occupancy and reduce void periods. Students, too, are used to booking early accommodation for next year. However, if the Bill becomes law before your new agreements start next September, your fixed-term contract may be converted into a periodic tenancy. That means that by the time students move in, the legal landscape (and their rights) could be very different from what you intended when signing.

Pros of Signing Tenancies Early (as You Always Have)

1. Securing Income and Tenants: You'll know you have tenants lined up, providing certainty in your planning and cash flow forecasts.
2. Students' Expectations: Students are accustomed to securing accommodation early. Waiting might mean losing them to competitors continuing with the usual timeline.
3. Market Advantage: If other landlords hesitate, you may attract more students by offering certainty now.

Cons of Signing Tenancies Early

1. Potential Need to Re-Issue Contracts: If the Bill's commencement date lands before next September's move-in, fixed-term agreements may need to be reissued or adapted to the new rules. This could create administrative headaches and confusion.
2. Reduced Control Over End Dates: By the time the tenancy starts, you may have lost the ability to rely on a fixed end date if the law changes mid-contract. If students decide to leave early (with two months' notice), you could face unexpected voids.
3. Uncertain Compliance Requirements: Further details—like the exact nature of notice requirements and any transitional provisions—might only become evident once the Bill is final. You may then have to revise paperwork or provide supplemental statements, adding costs and complexity.

Pros of Waiting to See How the Bill Develops

1. Clarity on Legal Requirements: By waiting, you might know the exact implementation date and final details, allowing you to draft fully compliant tenancies from the outset.
2. Avoid Contract Revisions: If you start the process after the new rules are in force (or have a confirmed start date), you can issue compliant periodic agreements immediately.
3. Market Stabilisation: Students might become more flexible about timelines once they understand the new norm if all landlords are in the same boat.
4. New tenancy agreements: The Bill creates a new type of tenancy: assured periodic tenancy. The Guild of Residential Landlords is ready for the change, and the Tenancy Builder will have the latest type ready.

Cons of Waiting

1. Losing Early-Bird Students: Students who prefer to secure their accommodation early might go elsewhere.
2. Uncertainty and Delays: You may rush to fill rooms closer to the start of the academic year, potentially accepting less ideal candidates or facing short void periods.
3. Increased Competition Later: If many landlords pause, listings could surge closer to the academic year, driving more competitive pricing and terms.

Balancing Risk and Flexibility

Some landlords are exploring middle-ground solutions:

• Take a Holding Deposit and Issue an "Agreement to Lease": Rather than entering into a complete tenancy agreement now, consider an agreement to lease that can be converted into a compliant tenancy later once the legislative position is clear. We have suitable wording in our Receipt for Holding Deposit. You would take a maximum of one week's holding deposit and ensure the deadline for the agreement date is extended well into next year. The parties agree to enter into a tenancy before the deadline date, and if the tenants withdraw beforehand, you may be able to retain the holding deposit.
• Shorter Fixed Terms with a Planned Switch: Offer a shorter initial term, acknowledging upfront that the tenancy will seamlessly roll into a periodic arrangement if the new rules are in place.
• Stay Updated and Informed: Watch our announcements closely. The government should provide at least some notice before the Bill commences. Once more precise timings emerge you can adjust your signing strategy.

Practical Steps Now

1. Review Current Documentation: Ensure your contracts have clear, fair terms. Remove any guaranteed rent increase clauses or other provisions likely to become invalid. Please see our article Preparing for the Renters’ Rights Bill 2024
2. Talk to Your Letting Agent or the Guild of Residential Landlords: Professional advice tailored to your portfolio can help you navigate these uncertain waters.
3. Communicate with Prospective Tenants: Students may also be aware of upcoming changes. An open dialogue can help manage their expectations and reassure them of altered timelines.

Conclusion

There's no one-size-fits-all answer. Your decision will depend on your risk aversion, the competitiveness of your local market, and your comfort with making contract changes mid-stream. While signing early offers security, compliance may be complicated if the bill arrives before move-in. Waiting provides legal clarity but may cost you potential tenants.

Whatever route you choose, your best tools are staying informed, maintaining flexibility, and seeking professional guidance. The Renters' Rights Bill 2024 may bring uncertainty, but with careful planning, you can minimise disruption and continue to serve the student market effectively.