Two months into the Renters’ Rights Act, we’re beginning to see some clear trends emerge.
In our previous editions of RRA in Action, we discussed how the new two-month tenant notice requirement was likely to create practical challenges for both landlords and tenants.
Two months on, we’re now seeing exactly how that is influencing the rental market.
Here, Emma Foreman, Operations & Lettings Director at Complete, looks at how the biggest lesson perhaps is that it’s not pets, rent increases or possession claims causing the most disruption. It’s notice periods.
A Slower Flow of New Tenancies
One noticeable trend is a reduction in the number of new tenancies completing during June and July. Whilst July is only partially complete, the pattern is already becoming clear.
As we know, tenants are now legally required to provide two months’ notice before leaving their current home. That means if a tenant serves notice today, the property they’re moving into is unlikely to be occupied until the latter part of September.
As a result, the entire lettings cycle has effectively shifted by around a month compared to what many of us have been used to for years.
Is This Actually a Bad Thing?
Initially, many feared that the two-month notice requirement would simply create longer void periods. I’m beginning to think the opposite could eventually become true. Once the market fully adjusts, most available properties will be advertised around two months before they’re ready for occupation. Prospective tenants will increasingly understand that they need to start looking earlier, whilst landlords and agents will become more accustomed to planning further ahead.
Instead of working against each other, the market should begin operating on the same timeline. If that happens, I think void periods could actually reduce – we’re not there yet, but I think that’s the direction the market is heading.
The Challenge for Empty Properties
Where I do think the biggest challenge remains is for landlords with vacant properties that are ready for immediate occupation e.g. New builds, relocations, empty stock. As propective tenants are now tied into serving two months’ notice, it significantly reduces the pool of tenants who are able to move immediately unless they happen to be in a genuine “move ready” position.
Landlords purchasing investment properties therefore need to factor this into their financial planning. Having contingency for a longer initial marketing period could become increasingly important.
Will We See More Tenant-in-Situ Investments?
One interesting consequence of this shift may be an increase in investors purchasing properties with tenants already in occupation. Whilst tenant-in-situ purchases can appear more complex under the Renters’ Rights Act, they remain entirely achievable when managed correctly.
For many investors, purchasing an income-producing property may become more attractive than buying an empty one that could remain vacant whilst waiting for a tenant to complete their notice elsewhere. Of course, making a property attractive to an investment buyer has never been more important, think about ensuring that a tenant paying a market rent, the property presented to a good modern standard and well maintained.
Looking Ahead
We’re still only just over two months into one of the biggest changes the private rented sector has experienced for decades. Some of the early disruption we’re seeing is simply the market adjusting to a completely different way of operating.
I suspect that over the next two or three months we’ll start to see this new rhythm settle into place. As awareness grows amongst tenants, landlords and agents alike, the market will naturally adapt.
The Renters’ Rights Act hasn’t just changed the law, it has changed the timeline on which the entire lettings market operates. The next few months will certainly make for interesting reading.
If you would like some more advice about the Renters’ Rights Act and how it affects you as a landlord, get in touch with the Complete team today.