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Thousands of new tenancies to become ASTs overnight

15 March 2010
Written by rosalind renshaw

    Thousands of higher-rent tenancies will pile into the tenancy deposit protection schemes over the next six months, set to put yet more pressure on them.

Currently, AST tenancies are those with rents up to £25,000 a year. Anything above that is a contractual tenancy, where there is no requirement to protect the tenancy deposit.

But from October 1, tenancies worth between £25,000 and £100,000 a year will become ASTs overnight, which means that by then, all these extra tenants’ deposits will have to have been protected.

The change will have a huge impact in central London and on family rental properties across the south-east, but also on student-shared HMO properties just about anywhere.

The requirement will catch all new tenancy agreements in the new price bracket, apart from very short-term ones, made from, and including, April onwards.

David Salusbury, chairman of the National Landlords Association, said: “The retrospective nature of this change is highly regrettable, and it could have a wide-ranging impact on the letting of private residential property. Landlords in this higher rent bracket will have to protect deposits for the first time. If they fail to do so by October 1, they could be in breach of the law. We are told the courts are being forewarned.

 “The NLA believes the Government is rushing through this change without fully thinking through the consequences. We call for greater consultation to ensure this measure does not have a negative impact on the private rented sector. We will continue to provide the most up-to-the minute help and advice on the issue to landlords and have published a guide to help landlords comply with the law. The NLA will continue the press the Government for further consultation.”

Lettings law specialist David Smith, of PainSmith solicitors, said: “It looks as though this will apply to tenancies already out there. As it happens, due to the way the Housing Act 1988 was constructed, the Government had very little choice as to how it did this. It could have done it in other ways but it would have taken longer and therefore could not have been rushed through to suit an election timetable. It will create a lot of problems in relation to tenancy deposit protection as the law technically requires that a deposit be protected within 14 days of receipt.

“However, that cannot happen for a tenancy that has shifted from a non-Housing Act tenancy to an AST by a quirk of the law.”

He added: “London will be heavily affected as will certain student properties in other cities. The deposit protection schemes and, unfortunately, TDS particularly, will also see an increase in deposits being protected and in disputes which will be of higher value and more contentious, which will also have a significant effect.”

Comments

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    All on one single tenancy...Joint & Sev

    • 17 March 2010 22:33 PM
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    NS The tenancy ends when either the tenants leave or are evicted. You are talking about the AGREEMENT and the FIXED TERM coming to an end. The tenancy continues in a periodic state unless they do all leave at the end date. If one leaves why is that the end of the tenancy? It’s just the end of that one of joint tenants occupancy and they are entitled to leave, either on the last day without notice or during the periodic state if they give notice. You cannot force all of joint tenants to give notice to leave (we’ve been there with the OFT on tenancy terms) and you would be unwise to allow a situation where one tenant can give notice that attempts to bind all of them as it will end in tears and tantrums – always does. You want quite the reverse in fact. Remember only a Court can LAWFULLY terminate a tenancy, we can only terminate the agreement. “This agreement” do you mean all of them on a single agreement?

    • 16 March 2010 18:07 PM
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    So they are on say a yearly tenancy and come the end of tenancy one leaves thats the end of tenancy, they all leave..unless of course one leaves during the year..it's still conclusion of the tenancy, if they All stay great they have to pay rent..wouldn't use this agreement in less than a four bedroom.

    • 16 March 2010 07:56 AM
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    NS sorry meant to include why is it "all over" if one joint tenant on an AT leaves? Remember once an AT always an AT between the parties so nothing becomes an AST just because one of joint tenants leaves. Can you explain that comment to me?

    • 15 March 2010 16:18 PM
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    Not Stupid - to use an Assured Tenancy the Landlord must have grounds initially for possession otherwise the occupiers could indeed stay for ever. Especially if they drop out and get jobs locally. So the Landlord needs Ground 1 and ideally 1(a). How many Landlords have actually lived in properties with a lot odf students in them as opposed to just 3 or 4. Some I grant you - but not the majority I doubt it. Plus there is the monor issue(!) that if there is a lender they will insist on AST as part of their consent. Tread carefully.

    • 15 March 2010 16:15 PM
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    Easy, just put student houses on Assured Tenancies, there not going to stay for ever, and if one tenant leaves its all over.

    • 15 March 2010 14:56 PM
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    The profession will not be the only ones that will be affected by yet more rushed "sound bite" so-called "popular" legislation by this discredited government before the election.
    As usual, Labour Party first - the Country a poor second.

    • 15 March 2010 12:15 PM
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    Always thought all deposits should be protected and the DPS has always been happy to take them and tenants more than happy to have them protected(never reached the dizzy heights of 10K deposits) so nothing's changed.

    • 15 March 2010 10:24 AM
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    Why should student lets be affected? They won't be if the Landlord has each occupier on a sharers AST and if he does that the sum of the parts will probably add up to more than the whole i.e. the rents individually will total more than a single agreement rent would. Only disadvantage is loss of joint and several liability for the occupiers as a single group. But just look at the nightmare of the lead tenant scenario in sharers, or what hapens when one of them weants to leave anyway. Divide and conquer I'd recommend!!David Smith's comments are the ones to focus on here, what matters now is a precise legal interpretation of what is going to happen not wishful thinking from any of the vested interest bodies. There is as much chance of politicians changing their minds on this as finding the moon is made of cheese - they have better things to do. Why shouldn't bigger deposits be protected anyway - more of an argument that they should be, surely? This limit should have been increased years ago anyway. Bet DPS are rubbing their hands at all those big deposits they are now going to receive that might otherwise have gone to TDS - another very good reason for using DPS by the way. Losing a dispute and being blamed for it by the Landlord on a £500 case is bad enough - just imagine it on a £5000 one. Incidentally expect a lot more disputes from tenants with large deposits.

    • 15 March 2010 10:17 AM
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