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Should I buy or should I rent?

View profile for Pam Kamel
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Many people think that purchasing a property is not achievable, and that their only option is to rent. But how much truth is there to this? There have been many developments in recent years which have seen tighter regulation from lenders, such as the nationalisation of Northern Rock, and the consequences have meant more hoops for potential buyers to jump through if they wish to purchase a property.  Pam Kamel, Trainee Solicitor, explains here why the benefits of buying a property as opposed to renting far outweigh the obstacles that may be faced.

Many people who live in rented accommodation live under a legal agreement which is called an Assured Shorthold Tenancy (“AST”).  An AST is an agreement entered into between a landlord and tenant which sets out the main terms of the rental arrangement. It will include the landlord’s contact details, how much rent is to be paid, when the rent is due, and obligations which both a tenant and landlord must abide by throughout the term of the agreement.  Importantly, the AST will be for a fixed period of time – for example, 6 or 12 months. 

How secure is a tenant living in rented accommodation?

As previously mentioned, a tenant can be certain that they can legally remain in their rented property for a fixed term.  Once this fixed term expires, the legal term known as ‘security of tenure’ comes in to play.  This term means that a tenant has a legal right to stay in the property after the fixed term expires.  A landlord can end this security of tenure at any stage by serving the tenant with notice to vacate.  

When comparing this to purchasing a property, as the registered legal owner, you have the right to occupy your property for an indefinite period of time – provided that you are up to date with your mortgage payments, should you purchase with the help of a mortgage.

When can a landlord ask a tenant to leave their property?

Section 21 of the Housing Act 1988 (“the Act”) allows a landlord to ask a tenant to leave their property after the fixed period of time in the AST has expired, without needing to prove any element of fault on the part of the tenant.  The landlord will serve a formal document called a section 21 notice on the tenant, which gives the tenant two months to leave the property.  This can be served on the tenant in the two months before the fixed term expires, but a landlord cannot ask a tenant to actually vacate the property throughout the fixed period of the AST.

According to BBC Panorama, more than 24,000 section 21 notices a year are served on tenants – that means 67 notices daily!

As an alternative to a section 21 notice, under the Act a landlord can serve a section 8 on a tenant in certain circumstances, including where a tenant fails to pay their rent for a certain period of time, damages their landlord’s property and/or causes a nuisance to their neighbours etc.  This notice can require the tenant to leave the property in as little as two weeks after it is served on the tenant.

What is the difference between monthly mortgage payments and rent?

Depending on the area that you decide to live in, you may be able to obtain a mortgage where the monthly payments are very similar to your monthly payments under rent.  It is always a good idea to speak to a financial advisor about your credit score, in case there are any adjustments that you need to make.  If you are unsure as to whether or not you think you will be eligible for a mortgage, we recommend that you contact a mortgage advisor or lender.

Can a tenant call their property ‘home’ if they rent it?

Under the terms of an AST, landlords have the right to place restrictions on their tenant regarding the use of the property.  The AST may also state that a tenant is not allowed to make any internal alterations or adjustments (for example, the installation of a satellite aerial, or a change in utility providers) without the consent of the landlord.  A landlord may reject a request made by a tenant, who therefore may not be able to make the desired changes to the property.  There may also be a clause in an AST which states that the tenant must keep the property in a certain condition.  When owning a property, the owner can make alterations and extensions as they desire, subject to title restrictions, building regulations and/or planning permission if relevant.

Many people assume that purchasing a property will be too costly or complicated, particularly if potential buyers feel that they occasionally struggle with rent.  However, in the current market, there can be considerable advantages to getting on the property ladder, and owning a house might not be as difficult as people think it is, particularly with assistance from government schemes such as Help to Buy ISA’s as well as the fact that stamp duty has now been abolished for first time buyers.

If you are currently renting and you are considering buying a property, you can contact Pam or another member of the team on 02392 753575 or email pamelakamel@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.