Two prominent letting agents have revealed a growing trend among landlord clients who are instructing them to incorporate “tracker” rent clauses into tenancy agreements. These clauses allow rents to adjust in tandem with landlord mortgage payments, triggered by fluctuations in the Bank of England’s interest rates.
Marc von Grundherr, the director of the London-based agency Benham and Reeves, shared his insights with the i newspaper, shedding light on this emerging practice. According to von Grundherr, an increasing number of landlords are requesting these specific clauses, reflecting a notable shift in the rental landscape.
Within his agency, von Grundherr has already drawn up two tenancy agreements that explicitly state rents can be subject to increases if the Bank of England raises its base rate. In a recent example, a three-year contract was negotiated, permitting the landlord to hike the rent annually by a minimum of eight percent. Moreover, this agreement included a provision allowing for additional rent adjustments if the Bank of England’s rate surpasses a two percent increase.
Von Grundherr explained, “Actually, the tenant is willing to accept that because they understand not every single landlord is the Duke of Westminster with no debt.” This perspective suggests that tenants are becoming more accepting of such clauses due to an understanding of the financial dynamics faced by landlords.
However, not all letting agents share von Grundherr’s sentiment. James Lindsay, a lettings agent based in Liverpool, expressed his refusal to incorporate similar clauses for one of his landlord clients. Lindsay defended his stance, stating, “I just outright refuse to do it. It’s the nature of the game. If I put all of my money on the stock market tomorrow and the stock market plummets, then tough; I’ve lost all my money. They’re trying to load the game so far in their own favour.”
The adoption of “rent tracker” clauses remains a topic of debate, with uncertainty about its prevalence. Even a spokesperson for tenants’ rights organization, Renters’ Rights London, acknowledged the practice’s novelty. They mentioned that such clauses typically feature in agreements lasting longer than one year, emphasizing that it is still “unusual” to encounter them in standard tenancy agreements.
As this emerging trend unfolds, it is clear that the relationship between landlords and tenants is evolving in response to broader economic factors, including changes in interest rates. The extent to which these “rent tracker” clauses will become a standard practice in the rental market remains to be seen, making it an issue that continues to attract attention and debate within the housing sector.