Changes to rent limits under assured tenancies

Currently a tenancy with an annual rent exceeding £25,000 cannot be an assured tenancy and landlords letting properties with rents above this threshold are not therefore bound by the special provisions which apply to assured tenancies, the most common form of which is the Assured Shorthold Tenancy.

The £25,000 threshold was set in 1990 and at that time was intended to exclude tenants of luxury properties from the protection given to tenants by assured tenancies. Only a small minority of properties were excluded from this regime and they are known as “common law tenancies”.

Today, many properties which would not perhaps be recognised as luxury lettings command a rent in excess of £25,000 and in recognition of this fact an Order has been made which will increase the rent threshold substantially to £100,000 for properties in England. The change came into effect on 1 October 2010.

The practical implications of this change are that landlords now need to comply with special rules which apply to assured and assured shorthold tenancies and in particular will need to ensure that they hold any deposit collected under the tenancy in an authorised tenancy deposit scheme. They will also need to comply with the steps set out in the Housing Act 1988 in order to gain possession of the property at the end of the tenancy term. Generally the provisions give greater protection to a tenant than a common law tenancy would have done.

Whilst the changes are not intended to be retrospective, the Order says that common law tenancies granted before 1 October 2010 with annual rents between £25,000 and £100,000 which would otherwise have been assured shorthold tenancies will have become assured shorthold tenancies on 1 October 2010.

It is not yet clear whether landlords in this category will be required to transfer any deposits they hold to a tenancy deposit scheme, but they will certainly need to comply with the provisions relating to regaining possession under the Housing Act 1988, irrespective of what their contractual tenancy terms may say.

Contact Justina Ridley on 01245 453857 if you are interested in finding out more.