I often get asked for long tenancy agreements of 3 to maybe 5 years to give my tenants long term security. Don’t get me wrong I would love nothing more to be able to give them a 25 year tenancy agreement and have the tenants agree to rent the property for 25 years. However the terms and conditions of the BTL mortgages we use stipulate that the tenant must be given an AST (Assured Shorthold Tenancy) of usually no more than 12 months.

12 Month AST

But why only 12 months?
This is to protect the lenders interests as well as yours. If in the worse senario you couldn’t meet the mortgage payments either because you were not getting the rent or maybe you’ve spent it all on holidays. The bank to protect its loan would seek to evict the tenants, take the property back and sell it on to payback the loan.

Evicting tenants

Tenants can only be evicted if the contract has elapsed or the tenants are in breach of contract (usually for non payment of rent). I’ve learn’t the hard way that even when you want to evict tenants the process is long and messy.

The Banks unwanted Situation

With a longer tenancy a situation could arise where you are not paying the mortgage, but the tenants cannot be evicted as they are not in breach of the tenancy. You would still be collecting rent, but not paying the mortgage. I suppose the bank may be able to take over ownership of the property, and keep the tenants on as their own? This would be a bit of a legal minefield therefore its understandable most banks insist on 12 month AST’s

Long Term Tenants

I always prefer long term tenants, but with conventional BTL mortgages it is difficult to offer longer tenancy agreements. How do you get around this? On one hand we want long term tenants, they want to be long term tenants, but we are not able to offer them longer tenancies.

I always make a point of telling my future tenants about my portfolio and my plans for it. I put it to them that I am a landlord, this is what I do, I buy property to rent out. If they pay the rent and behave why would I not rent the house to them?
I also make a point to tell them that if they pay on time in full they will almost never see me again, I will leave them alone. BUT if they do not pay me then I will be on to them.