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.

Landlords' legal disputes resolved in law firm's seminar series

A Leading West Midlands legal firm has announced two more workshops to help managing agents and commercial property landlords and tenants to protect themselves in these difficult economic times.

Higgs & Sons says the new events – September 22 and November 17 – are being held following a high demand for a recent workshop.

The Tenancies in Troubled Times workshops are designed to assist agents, landlords and tenants through the legal minefield that leasing a property can involve.

Nyree Applegarth, of Higgs & Sons’ dispute resolution team, said the workshops had been organised in response to the issues landlords and tenants face in the current difficult economic climate.

Nyree said: “Landlord and tenant law is a constantly shifting area and we recognised the need to keep people involved in property up to date on the latest practical information, legal judgments and case law. These events are aimed at property managers, developers, leasing agents, landlords and tenants and anyone working within real estate.

“The workshops are addressing a range of common concerns that regularly come to the attention of our dispute resolution team,” she added.

The September 22nd workshop will focus on disclaimers of leases and rent deposits, taking into account who can disclaim a lease and what limits and procedures are necessary, the effect of such action on third parties, how a rent deposit can be held and when a landlord can keep a deposit as a result of the tenant becoming insolvent.

In November, the focus will be on a case study looking at assignments of leases and dilapidations claims when a tenant has become insolvent, and will take into account whether claims can be pursued and whether the landlord has to agree to the assignment of a lease.

Each session runs from 8.15am until 9.45am and is free of charge and includes refreshments.

To reserve a place, email clare.smith@higgsandsons.co.uk or call 01384 327260.

Landlords and agents urged to know the law to avoid costly litigation

One of the West Midlands’ leading property lawyers is urging landlords and agents to understand their legal responsibilities better to remain on the right side of the law and to avoid costly litigation.

Nyree Applegarth, a property litigation specialist at Higgs & Sons, says that a recent High Court decision on tenancy deposit schemes is providing some much needed clarification on the obligations of landlords.

“Since 6 April 2007, it has been a legal requirement that any deposit paid be placed in one of three Government approved Tenancy Deposit Schemes,” says Nyree. “This is the case for all shorthold tenancies except if the rent exceeds £25,000 per annum.

“All competent letting agents should know the procedure inside out, as too should landlords who are managing properties without help from an agent. However, the legislation presents a plethora of potential traps for someone less well versed in the vagaries of the Housing Act 2004.”

There have been many cases involving the interpretation of the Act but the recent decision in Draycott v Hannells Lettings Ltd provides a sound indication of how the Court will deal with tenancy deposit issues.

Nyree said: “The dispute in the Draycott case arose because the letting agents had taken a deposit from a tenant, but failed to lodge it with one of the approved schemes, within 14 days of receipt. The deposit was registered with the Deposit Protection Scheme but not for some two and a half months after it was paid.

“The tenant therefore issued proceedings claiming that the letting agents were in breach of the requirement to lodge the deposit within 14 days and sought compensation equal to three times the amount of the deposit. The agents sought to defend the claim on the basis that any proceedings had to be brought against the landlord, not the agents, and that the claim had no merit, since by the time the proceedings had been issued, the deposit had been properly protected.”

In the first case the judge dismissed both arguments and ordered that compensation be paid to the tenant. However in an appeal at the High Court, it was decided that the judge had been too harsh on the agents.

Nyree said: “Landlords and agents needs to act fast, as where deposits are not registered until after proceedings had been started, there is nothing in this decision to prevent another judge from wielding the full force of the legislation as occurred in the Da Costa v Pinter case in April 2009.

“Here the tenancy agreement provided for a monthly rent of £1,950 but also stated 'Payment required in advance of £4,200'. The agents’ invoice described £2,250 of this sum as a deposit, and at the end of the tenancy the tenants asked for it back. As it was not forthcoming they issued county court proceedings for its return and also claimed the fine of three times the deposit sum. The deposit was then protected, after the issue of proceedings. The Judge accepted that the sum paid was a deposit and awarded the claimants the deposit money and the fine of £6,750.”

There have been suggestions, following on from the Harvey v Bamforth case, that a landlord is 'safe' so long as he protects the deposit before any court hearing. This is still likely to hold true, but in line with decision in the Draycott case, the Court is also willing to look at the requirements of each scheme, before concluding that the sanctions of section 214 of the Act automatically apply.

Nyree concludes: “All three of these cases tell landlords and agents one thing – whatever the outcome of court cases, it’s better to stay on the right side of the law to avoid costly litigation in what is a complex area of law.”

Higgs & Sons is headquartered at prestigious new offices in Brierley Hill’s Waterfront where 170 of its 180-strong team are based. The firm has recently been nominated for Best Law Firm (16 partners and over) in the Birmingham Law Society Awards.