Sunday 5th September 2010
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High Rent Residential Tenancies - Landlords Beware
The Housing Act 1988 introduced a new form of regulated tenancy for private residential property, known as an “assured” tenancy. One form of “assured tenancy” was an “assured shorthold”. As a result of changes in the law in 1997, virtually all assured tenancies are now assured shorthold (“AST”).
One significant exception has been tenancies whose annual rent exceeds £25,000.00 per year. Back in 1988 this rent level was thought to apply only to luxury flats where tenants did not particularly need statutory protection. With inflation over the years and the increase in multi-occupied property this has led to some anomalies. Let us suppose that there are 6 young professionals sharing a house each paying £600.00 per month in rent. The total rent payable under the tenancy agreement would be £43,200.00 with the result that the tenancy would not be an AST and the tenants would not therefore be entitled to receive 2 months’ notice in statutory form before being required to vacate the property.
The new law, the Assured Tenancies (Amendment) (England) Order 2010 which comes into force on 1 October 2010 is retrospective in that on that day any tenancy whose rent is more than £25,000.00 and less than £100,000.00 will be converted from an unregulated tenancy to an AST. Landlords who have entered into agreements on the basis that tenancies would not be ASTs will after 1 October find that they are.
There is an additional trap for high rent tenancies which commenced before February 1997 and which may now be afforded an even higher level of protection and which may as a result be difficult to repossess at all.
Perhaps most importantly, the Housing Act 2004 introduced a compulsory scheme to protect deposits paid by occupiers holding property under ASTs. Most legal commentators are of the view that landlords who are holding deposits under unregulated tenancies which will become ASTs on 1 October will need to take appropriate action before that date in order to avoid falling foul of the law. Usually this will involve making payments of the deposit to a company operating a recognised tenancy deposit scheme. Penalties for failing to do so are potentially severe. The landlord cannot use the “2 months’ notice ground” to get possession of the property and the Court is empowered to order the return of the deposit and a payment to the tenant of 3 times the amount of the deposit itself.
Ray Crudgington, head of the Commercial Property Department at Grant Saw, says:
“Landlords will need urgently to review their present arrangements on “high value” lettings so as to make sure that appropriate action is taken in good time for 1 October, or at least so that they know what steps will need to be taken should possession of the property be required in the future”.
If you'd like to talk to a commercial solicitor and find out how we can help you, please call us on 020 8858 6971 or e-mail commercial@grantsaw.co.uk
