The Latest Developments in Assured Shorthold Tenancies

On the 1st October 2010 the threshold for Assured Shorthold Tenancies (“AST’s”) increased from £25,000 to £100,000 per annum. Prior to this increase, rents that were above £25,000 per annum were seen as highly specialist, and as a result, enjoyed “bespoke” treatment. The original limit was set under the Housing Act 1988 (as amended). Twenty-two years later this has now been increased to take into consideration factors such as the rise in property rentals and inflation.

The introduction of any Acts or Statutory Instruments usually entails an “easing-in” period for different aspects of the legislation. In this case, however the introductory period will not apply.

The interesting point about the increase is that existing tenancies will be caught if they are within £100,000 per annum and under this legislation they will automatically be converted into AST’s. This presents a number of consequences:

• ‘Bespoke’ Tenancy Agreements that have been written without contemplation of the AST Regulations will now be covered under the Regulations of this Act.
• The tenants deposit held for these rentals has been brought in line with all other tenancies. In compliance with the Housing Act 2004 these deposits now have to be registered under the Tenancy Deposit Scheme.
• The termination clauses of the previously ‘bespoke’ rental agreements will now be overridden by Section 21 of the Housing Act 1988 (as amended). This creates untested scenarios, such as, if a Section 21 notice is served in September but comes into force in October. It would be difficult to establish at this point what the outcome would be.

This increase of the AST financial threshold could create new problems and there is a “wait to see” attitude as to how the Courts will interpret these changes currently and retrospectively.

This general information is not intended to give specific advice. Please consult your Solicitor for legal advice on your individual circumstances.