New leases for assured shorthold tenancies
All new tenancies granted on the estate by Knight Frank for Trinity House are assured shorthold tenancies ("ASTs"). Currently, most ASTs are on one-year contracts, although longer standing tenants have been able to request a four-year term, which has been granted in several cases. Recent lease renewals have entailed rent increases in line with inflation (circa 2.5%) or below.
Knight Frank's new proposal is for a standard lease of three years. The three-year lease will have a 2-month break clause option from month 10. We are relatively happy with longer leases as standard with a break clause. We are less happy with the rent setting mechanism. This is described as follows:
"The rent will be reviewed in accordance with the retail price index ('RPI'). The landlord and the tenant must agree that the rent is to be increased a minimum 3% and a maximum of 5% in years two and three in line with RPI and your renewal date."
First of all, we believe that the consumer price index ("CPI") should be used instead of RPI. It is now the most widely used measure of inflation. It is also more relevant - it uses rent as a proxy for housing costs while RPI includes mortgage interest costs (renters don't have mortgages). We also take the view that a guaranteed increase of 3%-5% after one and two years, regardless of the level of RPI, is not RPI linked. We are happy to have rent increases capped - RPI was often over 5% prior to the 2007-8 financial crisis. But object to a floor of 3%. Over the last five years, RPI has only been above 3% between February 2017 and November 2018. It was flat or negative for much of 2009 and also 2015 and is forecast by the Office for Budget Responsibility to be at or below 3% out to the end of 2023!
We will be talking to Trinity House to get greater clarity on their proposal and to suggest changes. Our preference is for rent increases to be equal to CPI flat. This is generous to Trinity House in the context of the article on page 28 of this week's Economist which states: "London's private rents have been flat in nominal terms for a year (and have fallen in real terms)." A rent increase of between 3% and 5% a year, regardless of inflation and rents in the broader lettings market, will increase rents by between 34% and 63% after 10 years. Faced with such an inexorable rise in their main cost of living, those looking for a community in which to put down roots for the long term will simply give up and move away. And who can blame them! As the Economist article concludes: "Stopping unscrupulous landlords from levying above-market rent rises on vulnerable tenants is appealing."
If you are negotiating a new lease with Knight Frank and would like TNRA's advice, please contact us on email@example.com.
Knight Frank's policy for shared tenancies
TNRA has received several queries recently on what happens when one tenant leaves a shared tenancy.
When there are several tenants under a joint and several tenancy and one wants to move out, it has been standard for the managing agent to charge an administration fee to find a new tenant and a fee to conduct reference checks on the new tenant. However, Knight Frank recently started charging the remaining tenants a fee for undertaking new reference checks on them as well.
We have been in contact with Lucy Jones, the Knight Frank Partner responsible for Trinity Village. She has agreed to only reference the incoming tenant when there is a chance of sharers, unless existing tenants are taking on a higher financial commitment. We hope that a very marginal change in rent levels won't be regarded in every case as justification for getting references on existing tenants too! Knight Frank's policy is to undertake full referencing if a tenant moves from one property to another. But, if the purpose of referencing is to establish affordability, references should again not be necessary if rent levels remain the same or reduce (eg in the case of downsizing).
Lucy Jones advises that their policy is to undertake new Right to Rent checks on existing as well as new tenants when a sharer changes. The law is summarised in this link: https://england.shelter.org.uk/housing_advice/private_renting/right_to_r.... Right to Rent checks are only needed if a tenancy started after 1 February 2016. A check isn't needed if a tenancy agreement started before these dates - even if a landlord renews the agreement. For tenancies entered into after 1 February 2016, for which a Right to Rent check was required by law, a landlord must do a follow-up check (within 12 months) only if a Right to Rent check showed there's a time limit on permission to stay in the UK. Otherwise, a follow-up Right to Rent check should not be required for a tenant who arrived after February 2016.
Reminder of refuse collection arrangements
There has been a recent increase in refuse and recycling being put out on the incorrect days, which in turn is leading to a rise in general rubbish in Trinity Village. The issue is being compounded by food waste being left in rubbish and recycling bags, which are then attacked by foxes, birds and other animals. As a reminder, refuse and recycling bags are collected by the Council each weekly on Tuesdays, for most of the estate (though Thursdays for some parts, eg Falmouth Road). Bags should only be put out on Monday evening or early on Tuesday morning. Residents on the east side of Trinity Church Square can also put their rubbish in the bin stores in Bedford Row. Food and garden waste is collected weekly on Fridays. Food should be left in the small brown bins, which should be put out either on Thursday evening or early on Friday morning. If you would like to obtain a brown bin for food waste, please email the Council at EnvironmentalCustom@southwark.gov.uk