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Estate agents increasingly locking tenants into longer terms without break clauses

Tenants are increasingly being locked into long contracts, proving stressful and expensive when they want to move out early

Most of the time the rental industry is criticised for not giving people enough security and the Labour party has recently pledged to introduce three-year tenancy agreements with strict rules to make it more difficult to evict tenants.

Yes, longer contracts can be beneficial, particularly for the 1 million families with children who rent and want stability. But circumstances can change and sometimes people need to make a swift exit.

For those who can sublet and get new flatmates in to fill the rooms when things go wrong, longer contracts can work out fine. For others, though, the situation can be expensive and stressful. Emma and Tim Johnson, both 29, signed up for a two-year contract with no break clause for a one–bedroom, ground floor flat in Stockwell. They were paying £1,342 per month. Emma got pregnant a few months after moving in and Tom changed jobs and moved on to a lower salary.

“I went into the agency and I was nine months pregnant and I explained that we needed to find a cheaper flat. We were told we couldn’t leave without paying 10% of the rent for the remaining year of the contract plus administration costs,” says Emma. “We were in an impossible situation whereby we had to pay charges immediately or the flat would not be put on the market. It felt so unreasonable and unfair, especially as the flat was taken by the first people that came to see it.”

David Cox, managing director of the Association of Residential Letting Agents, thinks that this is one of the major problems with longer term tenancies – if a person needs to move out early, they are legally required to pay and so, in many cases, the landlord is effectively getting double the rent. “This is especially the case in London where there are massive supply issues and huge demand for properties,” he said.

One landlord who charges £2,000 per month for his two- bedroom flat in Euston said that, from his experience, it is the estate agents not the landlords who are pushing people into longer contracts. “I don’t mind break clauses myself, but the estate agents encourage me not to do it. The present tenants I have are there for two years without a break clause.”

However, he admitted that getting a long-term guaranteed income stream works for him too. “It’s better for me to get a two-year tenancy because estate agencies charge you fees each time they find you a tenant. It’s not that I’m trying to be a monster, it’s that I need to pay off the mortgage.”

Both Labour and the Conservatives maintain that any future changes to the rental market need to ensure flexibility so tenants can leave if their circumstances change. But what happens in the meantime? One solution might be for greater regulation of estate agents. “Anybody can just open an office at nine o’clock and start practicing with no knowledge at all. They need to be signed up to the professional bodies,” says Cox. “People are exploiting tenants and the government needs to get on top of this issue.”