Regulated tenancies are now considered to be a rare breed – but what are they and why do they typically attract interest from investors?

Nearly all residential lettings by non-resident private landlords which date from before 15 January 1989 are regulated tenancies, coming under the Rent Act 1977. After that date, the majority of new lettings have been assured or assured shorthold tenancies, meaning that this type of tenancy isn’t made any more.

For those considering buying this type of asset class, it’s important to recognise what it entails. Simply put, the tenant has certain rights both in terms of how much rent they are charged and the security of their tenancy. A landlord isn’t able to evict the tenant unless it’s through a possession order from the courts – which tends only to be issued in special circumstances – so the tenant can remain in a property for life, passing it on to a surviving spouse who has also lived there.

Tenants pay a fair rent which is registered and set by the Rent Officer and once in place, this figure is the maximum the landlord can charge until it is reviewed or terminated, so it also tends to be less than the market rate for a comparable property. Regulated tenancies also tend to require a landlord to be responsible for major repairs to the property. 

Professional investors have long regarded regulated tenancies as a smart buy but with fewer now coming to the market, these gems of the auction world are beginning to attract private purchasers, too. Their desirability lies in the fact that regulated tenancies can be bought at a discount to vacant possession value given the various measures and restrictions in place. And, for those prepared to take a long-term view, the prospect of capital growth once the tenancy comes to an end and the property can be sold is an attractive one.

Anyone investing should bear in mind that properties are likely to need modernising prior to an eventual sale. However, the dwindling number of regulated tenancies in the UK does continue to make them desirable investments.

Further information

The next Savills Auction is on 12 February 2020 at The Marriott, Grosvenor Square, London W1. Details from Savills Auctions