Assured Shorthold Tenancy Thresholds to Increase from October 2010

Published ¤ 29/09/2010 15:16:50

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From 1st October, the government is increasing the threshold below which tenancies must be Assured Shorthold Tenancy agreements. This will cause thousands of higher-rent tenancies will pile into the tenancy deposit protection schemes, 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 also become ASTs, which means that all these extra tenants’ deposits must be protected within the Tenancy Deposit Scheme.
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 effect all tenancy agreements in the new price bracket made since April 2010.
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: "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."
If you are a landlord, and concerned about the impact of these new regulations, speak to your letting agent, or call PKS on the number above.
Did you know that PKS are able to provide Rent Guarantee insurance to protect your rent (up to £2,500 per month) should your tenant fall into arrears. Call us for more details.

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