Monday 15 November 2010

Landlords beware! New rules on assured shorthold tenancies introduced

Landlords in England are being warned to update themselves on new rules surrounding assured shorthold tenancies as the rules have now changed.

Sara Shepherd, a specialist property solicitor at Midlands law firm Higgs & Sons, says that landlords across England need to be aware of the new rules and act accordingly.

“Prior to 1 October 2010, a residential tenancy could not be an assured shorthold tenancy if the rent exceeded £25,000 per annum,” says Sara.

“This was designed to exclude tenants of luxury houses from protection under the Housing Act, but due to rising rents many tenancies of non-luxury properties now have annual rents of more than £25,000. The most common examples of this are large student houses and London flats.

“From 1 October 2010, the rules changed, with the threshold rising to £100,000 per annum. The effect of the change is retrospective, so it affects all new and existing tenancies.”

Implications for Landlords

According to Sara, the rules change has a number of implications for landlords.

“A landlord who takes a deposit under an assured shorthold tenancy must protect it in an approved deposit scheme. There are serious sanctions for landlords for failing to comply with this - including fines and limitations on the landlord's ability to get the property back. Although the government has said that it is not expecting existing deposits to be placed in a deposit scheme, this is still subject to test in the courts, which may take a different view. In my opinion, a cautious landlord would now place all existing deposits in an approved scheme.”

Serving Notice

The changes also mean that the rules as to minimum length of term and length and format of notices now apply to these tenancies, whatever it actually says in the tenancy agreement. All assured shorthold tenancies have to last for at least six months, and landlords must use the required forms of notice to terminate them, otherwise the notice will not be effective.

Pre February 1997

Sara has one particular warning for landlords of any tenancies with rent of over £25,000 per annum which started before 28 February 1997. “These are rare but landlords who have them will find they have converted automatically into assured tenancies, not assured shorthold tenancies,” says Sara.

“Landlords will not be able to terminate these on two months' notice, but will have to be able to show one of the grounds from the Housing Act - making it much harder to get back possession of the property.”

Good news

The new rules do bring some good news for landlords. The main one is that landlords can use the accelerated possession procedure in the courts - which is a faster and more cost-effective method of obtaining possession of properties, and which is only available for use with assured shorthold tenancies.

There is more good news for landlords. Sara says: “Previously, landlords could find that tenants of residential flats paying over £25,000 per annum had acquired rights of first refusal under the Landlord and Tenant Act 1987 on any sale of the freehold by their landlord. This caused delays and cost landlords money when they were trying to sell their property. The new rules from 1 October mean that in most cases it will now only be an issue where tenants of residential flats are paying over £100,000 per annum.”

For specialist legal advice or to speak with Sara Shepherd contact her directly on 0845 111 5050.

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