With complications relating to COVID-19, it’s more important than ever for landlords to look after good tenants and encourage them to remain in their rental property and renew their tenancy. Mount & Minster letting agents advise on how to negotiate a tenancy renewal that works for both landlord and tenant.
The ideal time to contact your tenants is around 12-16 weeks before the end of the fixed term. This should be done in writing explaining you're happy with their occupation and you’d like them to stay in the property. The key here is to give yourself the time that's needed to agree terms while knowing well in advance if you need to prepare to remarket the property and find new tenants.
As a landlord, there are two key variables one should consider when negotiating a renewal: pricing and length of tenancy.
1. PricingIt’s essential you listen to the advice of your letting agent and understand your property’s value in the current local market. A good agent will know whether the market may have changed significantly since the tenants commenced their tenancy, particularly during the current climate.
Other reasons why the market may have changed, include:
Seasonal markets can differ. For instance, if you enter a contract in December and the fixed term ends 18 months later in June then demand for property, and thus rental asking prices, is likely to be significantly higher as the summer months have been known to be the peak rental season.
Developments in the local area may have increased or decreased its desirability - for instance, the introduction of new transport links.
Once you have determined what is a reasonable price, you need to consider expenses and cash flow. If a tenancy agreement is renewed you will avoid marketing fees from your agent, as well as void periods where you remain liable for bills, council tax, and mortgage payments without any rental income. It is worth taking this into account when considering pricing with your current renters.
Whilst the current economy faces challenges, it’s important to bear in mind that the residential lettings market is quieter and many renters are struggling to afford what they could pre-Covid. This means there is less demand in the market and many renters are looking to downsize or reduce their rent. When negotiating a renewal, offering slightly lower rent could see you better off in the long term than if you attempt to remarket.
2. Contract LengthYour agent should seek to structure your renewed rental contract to allow the property to return to the market when you would enjoy maximum pricing leverage. The best time to end a contract is generally in the June to September peak period for lettings, but this will vary between type and location of property.
Throughout the entire process, it’s important to remember that you and your renters are working towards the same goal: they want to live at your property and you want to keep them there.