If you’re involved in the letting or renting of properties, it’s essential to know the importance of what an Assured Shorthold Tenancy (AST) is. It is, in short, a mode of formal agreement that landlords use in order to let their residential properties to any private tenants.
Initially introduced by the Housing Act 1988, since February 1997 the AST has become the most common form of arrangement that involves a private residential landlord.
Technically, an AST can last for any duration. However, all tenants have a legal right to stay in a property for a minimum period of six months, regardless of whether the AST was for a shorter term than this.
Why do we need ASTs and what do they contain?
The basic principle of an Assured Shorthold Tenancy is to offer some security to the tenant. This means that as long as the tenant pays the rent and abides by the conditions of the agreement, then they are entitled to occupy the property for the length of the term.
Furthermore, ASTs additionally serve to protect the tenant as the landlord is not permitted to increase the rent during a fixed term unless you agree to it, or your contract contains a rent review clause.
A rent review clause usually establishes:
- when an increase can happen
- how much notice the tenant will receive
- a method for calculating the new rental amount
This assurance also exists to protect the landlord too. The landlord is entitled to regain the property at the end of the agreed term with the tenant having no further rights of occupation.
In almost all cases, the landlord and tenant will agree to a contract and both parties will sign it before the tenancy starts.
Usually, the fixed term is between six and twenty-four months but ASTs can also be ‘periodic’, which is essentially a rolling weekly or monthly contract. Importantly, the contract also needs to stipulate a rental amount that needs paying on a given date.
In the hypothetical absence of a contract, then the tenant has the legal right to ask the landlord to supply, in writing:
- the tenancy start date
- the rental amount and dates for payment
- any rent-review clause
- the duration of the term
Under what circumstances do we use ASTs?
Firstly, before we clarify when we can use an AST, we need to establish when a tenancy can or can’t actually be an AST. On the government’s www.gov.uk website, the official regulations are as follows:
A tenancy can be an AST if all of the following apply:
- the property you rent is private
- the tenancy started on or after 15th January 1989
- the property is the tenant’s main accommodation
- the landlord doesn’t live in the property
A tenancy can’t be an AST if:
- it began or was agreed before 15th January 1989
- the rent is more than £100,000 a year
- the rent is less than £250 a year (less than £1,000 in London)
- it’s a business tenancy or tenancy of licensed premises
- the property is a holiday let
- your landlord is a local council
Therefore, as we can see, ASTs can only be used by private landlords and housing associations and when the landlord doesn’t live in the property, providing it’s the tenant’s main home.
ASTs can’t be used for business tenancies or pubs, for holiday lets or for lodgers living in the residence. Although it rarely applies, it’s also useful to know that ASTs can’t be used when the rental amount is under £250 a year (or £1,000 in London) or above £100,000 a year.
How to set up an AST and what to include
Setting up an AST correctly is of paramount importance. It is a legal contract between the landlord and the tenant and as a result, it is fundamental to make sure that everything is perfectly clear to all parties involved, and that there are no topics of contention.
If there are any mistakes in the wording or parts of it which may be vague or ambiguous, the AST could be rendered invalid. In extreme cases, this could make it difficult to regain occupation of the property or secure payment of the rent.
After being drawn up, the AST should set down all the terms and conditions under which the tenant is entitled to occupy the property. These include, for example, what they may use the said property for, things they are not permitted to do, upon whom the responsibility falls regarding any damage and lastly, how much the rent is and the specified date it should be paid.
Adding additional clauses to an AST agreement
Landlords sometimes wish to add in addendums as additional clauses in the AST. Whilst these addendums could be anything ranging from the tenant being responsible for clearing pipe blockages or whether or not the loft space is for storage, a common addendum regards whether pets are welcome in the property or not.
It’s actually an accepted statistic in the lettings market that tenants who own pets struggle to find rental properties where their pets are welcome.
Because of this, landlords may actually be missing out on a large share of the rental market by excluding pet owners as almost half of households in the UK currently own a pet.
If you do wish to negotiate additional clauses into the AST regarding pets, it may be worth speaking to the prospective tenants and asking questions about their pet, such as its behaviour and who will look after it when they are not at home.
Tenants should always be honest from the start and never attempt to simply sneak the pet in without prior permission.
Making changes to an AST
Normally, a tenancy agreement can’t be amended unless both parties agree to the changes.
If both parties do agree to any changes, the modifications should be recorded in writing either by drawing up a new tenancy agreement or by amending the existing agreement.
Always make sure everything is in writing as changes that are agreed verbally can lead to problems. In short, without written documentation, they are harder to prove.
Ending a tenancy and possible evictions
Very simply, when the AST comes to an end, the landlord and the tenant have two options. Extend the tenancy, or bring it to a close.
If the tenant wishes to stay, they can either agree to a new fixed-term contract or possibly begin a periodic agreement which means that a rolling contract begins on a weekly or monthly basis.
Alternatively, if the tenant wishes to leave, they can end the tenancy by moving out and returning the keys on the contract’s specified end date.
However, if we look at bringing the AST to a close in more detail, if a landlord wishes to end the AST before the end of term, then there are typically two main procedures used to achieve this.
Section 21 notice
The Section 21 procedure for ending a tenancy can be used when a landlord doesn’t require a specific reason to end it. It’s normally used when an AST reaches the end of its term and the landlord doesn’t wish to renew.
There are specific requirements around the usage of issuing a Section 21 notice including a landlord giving a minimum of two months’ notice.
Section 8 notice
The Section 8 procedure is used when the landlord wants to end the tenancy and has legitimate grounds for doing so. The reasons can be varied, although typically they involve the tenant breaking a specific term of the AST.
Common grounds for use of Section 8 noticeare that the tenant is at least two months in arrears with their rent, has damaged the property in some negligent manner, or is engaged in anti-social behaviour regarding the neighbours.
Tenants are empowered to challenge these notices in court if they choose. They can give reasons as to why they should not be evicted which may include irregularities or discrepancies in the AST. The landlord can then only evict the tenant if the court grants its permission to do so.
Why you should let Townends assist you with your AST
Staying compliant in the property lettings market is a time-consuming and at times, a baffling endeavour.
By allowing your local property experts at Townends to assist you with your AST, you’re removing the stress from the procedure. We offer landlords and tenants the opportunity to enjoy a smoothly run tenancy which benefits both parties.
We’re experts in the technicalities and legalities of all the formal documentation that can confuse and bemuse landlords and tenants alike, and who sometimes attempt to get it done independently.
Complying with the law is fundamental, and there are heavy fines and even prison sentences for landlords who are not up to date with their paperwork.
Contact us today so a proficient and fully-qualified member of our team can manage all the processes for you. With more than 25 years’ experience in buying, selling, letting and assisting people to rent property all over London and Surrey, we have the know how to look after your house.