Regulated tenancies can be an attractive investment prospect with an additional bonus, says Chinneck Shaw Property Manager Joe Rocks.
While some may back away from owning properties where the tenant has the right to remain for life, Joe can see the benefits for landlords who take the long view.
What is a Regulated Tenancy?
So first things first, Regulated Tenancies date back to the Rent Act 1977. This Act applies to all residential tenancies created before 15 January 1989.
Crucially Regulated Tenancies give the tenant the right and security to remain in their property for life. Tenants usually pay a ‘Fair Rent’ set by a Rent Officer at the Valuation Office Agency. This will usually be lower than a market rent for the equivalent property and can only be increased every two years through application to the Rent Officer by the landlord.
Succession rights mean a Regulated Tenant can pass on a tenancy to a close relative if that person has lived at the property for two years before the death of the original tenant. The new tenant would pay a market rent.
What makes a Regulated Tenancy attractive to investors?
Properties with a regulated tenancy in place can usually be bought for a lower price due to the lifetime security for the tenant and the restriction on rental increases. At the end of a Regulated Tenancy the property can be sold with both vacant possession and the potential to benefit from capital growth accrued since the purchase was made.
There are fewer than 75,000 Regulated Tenancies left in the UK and they are highly sought after. Regulated Tenancies have been seen to trade at more than 90% of vacant value – and in some cases even 100% of vacant value – with a rental yield of 7% gross or more.
Joe explained: “Regulated Tenancies offer peace of mind for the owner as they know their property is being looked after and treated like home by the tenants.
“And from the tenant’s point of view they are able to put down roots and feel they belong.”
Having been involved in property management since 1883 when the firm was formed, Chinneck Shaw is in the remarkable position of managing properties where generations of families have lived in Regulated Tenancies.
“We do manage many regulated tenancies. We currently have tenants in their 90’s that have lived in their properties all their lives, having succeeded to their parents’ tenancies.
“Over the years we do get close to these elderly tenants and I have even popped in to help them at times as many of them still live independently. Recently an elderly tenant called to report her smoke alarms were beeping, so I changed the batteries for her. On another occasion at an inspection I bled the radiators and re-programmed the boiler to save the landlord having to pay for an engineer to visit.”
“If we go into our basement we can still see our archives of the properties we have been managing all these years. Some date back to when our firm started in 1883 and we all enjoy sharing stories about former tenants as the years go on, so they are never forgotten,” he said.