Buy-to-let lenders are worried over how the government is to introduce compulsory three-year tenancies even though in principle most lenders now allow landlords to offer them, trade body UK Finance has revealed.

Housing ministry the DHCLG is currently consulting on whether to bring in a compulsory three-year tenancy term with a six-month break clause.

Housing Secretary James Brokenshire (left) recently said  that it was “deeply unfair when renters are forced to uproot their lives or find new schools for their children at short notice due to the terms of their rental contract”.

The proposed new contract would effectively introduce a six-month probationary period for both landlord and tenant, after which the contract would become binding for three years. During this period tenants can give notice, but only two months in advance.

But lenders are apparently one-step ahead of the DHCLG and ‘most’ now allow landlords to offer three-year tenancies, UK Finance says.

Despite this, lenders have concerns over several aspects of the government’s proposals. One is that landlords will evict tenants prematurely during the six-month probationary period if they think they’re a risk.

Higher rents

Also, landlords may pre-load higher rents into the tenancy for riskier tenant groups in expectation of higher costs during the three years of the tenancy. UK Finance also says there is little appetite for longer tenancies among both tenants and landlords.

“Buy-to-let mortgage lenders are supportive of measures which enhance security for tenants,” says Carla Sateriale (right) from UK Finance.

“However, lenders believe that a few additional points need to be clarified for the new tenancy model to deliver the desired outcome.”

Adam Male (below), Director of Lettings at agency Urban.co.uk,  says: “The introduction of three-year tenancies would be an extremely clumsy and ill-advised move by the government and one that will further suppress the buy-to-let market.

“This is nothing more than an attempt to appear pro-tenant in order to grab votes and the reality is that the government has little interest in the nation’s tenants and the end result will not favour them.”

Two weeks ago The Sun newspaper incorrectly reported that the government was planning to rush through its plans for three year tenancies ahead of the consultation ending.