This is the fourth and final part of my series on how the Renters’ Rights Bill affects smaller private student landlords.
Links to the other posts can be found in the Series Overview.
This series looks at how the Renters’ Rights Bill affects smaller private student landlords rather than universities or purpose-built student accommodation.
In previous parts, I examined fixed-term abolition, new rent rules and the new ground for possession, ground 4A. In this post, I want to consider generally the situation that faces student landlords and the options available to them.
A grim prospect
I have to say that the prospect for many student landlords is not great.
As discussed in Part 1, tenants will be able to end their tenancy partway through the academic year, when it will be hard for landlords to find replacements. This could cause landlords significant financial losses.
As discussed in Part 2, landlords will no longer be able to take rent in advance, which may make foreign students less attractive prospects. Unless maybe they are willing to sign up to a professional guarantee company.
As discussed in Part 3, landlords have never been able to evict tenants quickly, but if the conditions set out in the new student eviction ground 4A do not apply, it may be difficult for them to evict student tenants who refuse to vacate at all.
So what are the options available for student landlords?
1 Give individual tenancies rather than joint tenancies.
Student landlords have traditionally rented out student properties on a joint tenancy basis. This means that if tenants move out during the fixed term, this is the student’s problem as they will all remain liable for the rent.
This advantage will end with the coming into force of the Renters Rights Act, the conversion of all fixed-term ASTs to assured periodic tenancies and the right for tenants to serve a two-month Notice to Quit.
Renting property on a room by room basis means that if a student decides to leave, his notice to quit will only affect his own tenancy.
The landlord will not be faced with the prospect of the remaining tenants being without a tenancy, finding a replacement tenant they are willing to sign a new agreement with, having to re-do the inventory and guarantee deeds and so on.
Bearing in mind also that if you allow them to stay without giving them a new tenancy agreement, you could face a fine from the Local Authority.
So my advice to student landlords looking to remain in the sector is to rent individual rooms to tenants with shared use of the house facilities. You will make life much easier for yourself.
2 Consider letting on residential licenses
Residential licenses are not really affected by the Renters Rights Act (although licensee landlords may, in due course, be required to sign up to the new Landlords Database and Property Redress Scheme). So licensee landlords have the advantage of being able to give a fixed term.
However, if you are looking to go down this route you need to be REALLY careful. The default position for residential occupation is a tenancy.
Landlords also often have a false view of licenses:
- You will still need to get a possession order if the occupiers refuse to vacate (ie you can’t just give them a two week notice and then change the locks), and
- The Tenant Fees Act will apply (although it refers to ‘tenants’, s28(1) provides that the meaning of ‘tenancy’ includes a license to occupy)
I discussed residential licenses in my post here.
The best way to turn an occupation which would normally be a tenancy into a residential license, is to ensure that the occupier does not have ‘exclusive occupation’ of the property (for reasons explained in the post linked above).
This is normally done by providing services such as cleaning, provision of clean sheets and towels, general upkeep such as changing lightbulbs etc. This sort of accommodation is known as ‘serviced accommodation’.
However, for the occupation to be a license, the landlord or his staff must be able to enter the property at will using their keys to provide these services, rather than just with the occupiers’ permission.
It is important that the services are actually provided. This will be an expense for the landlord, although he will have the comfort of being able to monitor the condition of his property and its treatment by the occupiers.
It is also possible to create a residential license if the landlord reserves the right to move the occupier to a different room or property. However, if this right is never used, it may put the status of the license in danger. It is safer to provide services.
For the avoidance of doubt, you cannot create a residential license just by getting the occupier to sign a piece of paper which states it is creating a license.
Genuine serviced accommodation can still have a fixed term, which will avoid the problems being introduced by the Renters’ Rights Act. It will, inevitably though, be more expensive than a bog standard student house today.
But never forget that, unless the occupation genuinely lacks exclusive possession and services are actively provided, the arrangement will in most cases still be a tenancy.
3 Bringing properties within the scope of ‘Purpose Built Student Accommodation’ (PBSA)
This is not easy and may be impossible for the smaller properties.
Landlords thinking of doing this should take professional advice, as it is beyond the scope of this post to comment.
4. Renting to parents for students to occupy
This would take the letting outside of the Renters Rights Act, as the parents would be the tenants rather than occupiers. It would be a form of ‘rent to rent’ situation, and as such would be a business let rather than an assured tenancy.
It could work, and it may be something that student landlords may want to consider. Although they should take legal advice first and get their agreements with the parents professionally drafted.
There are many pitfalls with rent-to-rent situations, and you need to be extremely careful. It is not something you should enter into in a ‘gung ho’ manner!
5 Renting properties to Universities to sublet to students
This would avoid the problems brought in by the Act, but you would also lose control of the property. You may also experience problems getting it back again.
Again, if you are considering this, you should take proper legal advice before doing anything.
Anthony Gold would be a suitable firm to advise, for example on points 3, 4 and 5, as some of their staff have experience in this area of work.
Be aware that options 2 and 4 in particular would be high-risk options and subject to careful scrutiny by Local Authorities (who have extensive powers to fine and prosecute) and Judges if the arrangements are ever the subject of proceedings.
If you get them wrong, it could prove very expensive for you. It may be easier and less problematic to opt for option 6:
6 Exiting the student market
My feeling is that this will be the decision of many student landlords, particularly those renting out smaller properties which are not HMOs.
Indeed, I have heard that the government wishes to discourage private-sector landlords from renting to students.
They would prefer students to be housed in University or PBSA, leaving other properties free to let to families or young professional tenants. Which would have the advantage of increasing the accommodation available to those hard-pressed sectors.
My advice to student landlords, particularly student landlords of smaller properties, is to consider very carefully whether you want to remain in the student sector.
It is going to become far more difficult and potentially less profitable, as tenants will be able to leave at any time on giving two months’ notice.
This will not be such a problem when renting to more traditional tenants who will be available to rent property at any time of the year, rather than being bound by the academic year as is the case with students.
There is also, of course, the option to sell up and stop being a landlord altogether.
If you are a student
It is already difficult to find accommodation in many towns and cities. Sadly, it looks as if this is going to get worse.
I have two suggestions.
One is to elect to study at a college or university within travelling distance from where you live. This will not be particularly appealing, though, for many students, as one of the joys of being a student is living in another part of the country and being independent.
The other is to consider being a lodger. Before I met my husband, I had lodgers for some six years, several of whom were students at my local university and who stayed for the whole academic year.
Becoming a lodger in a resident landlord’s home is one of the few arrangements unaffected by the Renters’ Rights Act.
And finally
So this is the end of my series on student lets. I hope it has been useful for you, if you are a student landlord.
Whatever happens, the Renters’ Rights Act will transform the student housing landscape. Those who adapt early are likely to be those who fare the best.
If you have any thoughts on the points raised, please put them in the comments below.
Links to earlier posts can be found in the Series Overview.
Thoughts on offering individual tenancies versus a joint tenancy in a student HMO.
Individual tenancies can suit students who do not already know each other, but they can create several practical and legal headaches for landlords of student HMOs:
a) Utility Disputes
If utilities are included (even with a capped allowance) it becomes harder to manage fair usage. One tenant could use far more energy. For example, a reptile tank with a 24-hour heat lamp or frequent overnight visitors, triggering disputes about contributions when the cap is exceeded. With a joint tenancy the group usually sorts this themselves, because they are managing their utility bills.
b) Social Compatibility
Tenants who do not know each may be more likely to clash. Groups who form together tend to self-select for compatibility, reducing complaints and landlord intervention.
c) Administrative Burden
One joint tenancy equals one set of administrative work. Individual tenancies multiply that work by the number of rooms.
d) Serving Notices and Repossession
Staggered tenancy dates make it harder to regain possession of the whole house at once. Coordinating multiple notice periods can delay reletting and complicates maintenance while some rooms remain occupied
e) Communal Responsibility
Individual contracts weaken shared accountability for kitchens, bathrooms and communal cleaning. Landlords can end up paying for regular cleaning.
f) Damage and Liability
Damage in communal areas, can be hard to attribute to one person. With a joint tenancy, the group is jointly liable. With individual tenancies, the landlord may have no practical way to recover the cost.
g) Voids and Uneven Occupancy
Different move-out dates increase the risk of empty rooms (lost income) and make marketing and housekeeping more complicated.
h) Licensing, Council Tax and Insurance Implications
Some insurers treat individually let rooms differently, potentially increasing premiums or restricting cover.
Where all tenants are full-time students, council tax exemption still applies, but it can become more time-consuming to manage when individual tenancies start and end on different dates.
Summary
Individual student tenancies may appear flexible, but they typically increase administrative complexity, cost and risk. For student HMOs a joint student tenancy is, in my opinion, usually the more practical, efficient and robust solution.
After 23 years letting to students, I will be sticking with joint student tenancies. My advice, if you currently use joint student agreements, think very carefully before switching to individual agreements.
Thank you for your thoughts.
The Housing Act 1988 (which took over from the Rent Act 1977 in 1989) over time brought in massive changes to the Private Rented Sector. This act will probably do the same but as to how it will actually work out, we will all have to wait and see.
I fear it will not be good for student landlords but I could be wrong.