Landlord and Tenant – Change to the annual rent threshold for Residential Lettings
The Housing Act 1996 brought about a key amendment making all lettings by the private sector where the tenancy was created after 28 February 1997, alternatively any fixed term tenancies which came to an end after 28 February 1997, automatically assured shorthold tenancies unless the tenant chose to grant a fully assured tenancy. Tenants under assured shorthold tenancies have no security of tenure. This was provided the annual rent was less than £25,000. Pursuant to the Assured Tenancies (Amendment) (England) Order 2010, from 1 October 2010 this will change to annual rent of £100,000. Whilst this change is not retrospective, it will affect all tenancies already in place on 1 October 2010 which means that any tenancy started before I October for rent of more than £25,000 but less than £100,000 per annum will automatically convert overnight to an assured shorthold tenancy on 1 October. This means that all of the rights and responsibilities associated with the Housing Act 1988 will be extended to higher rent properties for the first time.
The original threshold was introduced in order to exclude ‘luxury lets’, however the limit was established in 1990 and has not been revisited to take account of inflation since. The Government consulted as a result of a Rugg Review recommendation and decided to increase the threshold to £100,000 as a result. This figure will subsequently be reviewed at five yearly intervals.
For Landlords, this change highlights a number of problems. For example deposits paid under assured shorthold tenancies must be protected under the tenancy deposit scheme within 14 days of receipt. Tenancies that convert to assured shorthold tenancy on 1 October 2010 will have had deposits taken on them prior to that date. Those deposits will not have been protected under the tenancy deposit scheme within 14 days of receipt. Therefore, it is arguable that the deposit will not need to be protected since they were taken at a point when protection was not required. It is usually the act of taking the deposit that is seen as trigger for protection. However, upon renewal of the tenancy, it would seem that the deposit will need to be protected. The Government has announced its view that existing tenancies that become assured shorthold tenancies from 1 October 2010 will have to protect the rent deposits as of 1 October.
Landlords may find that they are affected by other issues resulting from the conversion of their tenancy to an assured shorthold tenancy.
Nita King
July 2010
This article gives a general overview only and the legal position at the time of writing this article. It cannot be relied upon in any particular case. Specific legal advice must always be considered to include consideration as to whether the legal position contained in this article has changed since going to print. For further information and advice, please contact Nita King 01793 527141 or alternatively by email on Nita.King@lemon-co.co.uk.
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