Reminder: Housing Act 1988 Threshold Change 1st October 2010
In March and again in July we circulated emails regarding this important change in legislation.
To confirm, from 1/10/10 the rent threshold on Housing Act 1988 tenancies assured and ASTs will increase from £25,000 to £100,000 per annum. What this means in practice is that any property with a rent of £8333.33 or less per month will be an AST. Any property with a rent of more than £100,000 per annum will be subject to the normal contractual tenancy.
The transition should have been relatively straightforward, however the last government failed to provide any transition period, This means that various questions have been raised with regard to the registration of deposits and the service of notices. I will try to answer these points in more detail below.
The Department for Communities and Local Government (the DCLG) have stated that the intention of the legislation was always to ensure that deposits were protected within 14 days of the legislative change - namely 1/10/10.
However, some commentators point out that section 213 (1) of the 2004 Housing Act states that: 'Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme'. Note the wording deposit paid to a person in connection with a shorthold tenancy. At the time of receiving the deposit it was received in connection with a contractual tenancy and not an AST.
Section 213 (3) goes on to say 'Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received'. Again, it refers to the receiving of a deposit in connection with a shorthold tenancy. Commentators argue that because the deposit was never received in connection with a shorthold tenancy, section 213(1) and subsequent sub-sections do not apply and therefore, there is no requirement to protect the deposit.
Whilst it is probable that courts will need to provide clarification in this area, the advice from Central office is to follow the guidance from DCLG and protect the deposit and issue the prescribed information within 14 days of 1/10/10.
Service of Notice
It is our understanding that if a notice to quit has been served and expires prior to 1/10/10 then even in the event of possession proceedings taking place after 1/10/10 there will be no AST created because the issue of a valid notice to quit brings the tenancy to an end
If a notice to quit is served before 1 October but expires after, the position is less clear. However our opinion is that the notice will be valid because it would have been the correct notice to serve at the time of service. After the 1/10/10 the normal AST procedures for possession will apply.
As before, it is probably that the courts will need to provide further clarification in this area, and in the meantime we recommend calling the Belvoir Lettings Legal Helpline to discuss any individual cases.
Terms of Tenancy
A potential problem with the change is if the terms of the tenancy in the old agreement are not compatible with an assured shorthold tenancy. Or if there are terms missing from the contractual tenancy that had a landlord or tenant known there was going to be this change they would have incorporated.
However, in essence, often the clauses of the two types of tenancy will be similar, so the terms of the contractual tenancy would continue with the assured shorthold tenancy.
The main difference is likely to be the notice period for a landlord. Some contractual tenancy will no doubt have a clause allowing the landlord to give say one months’ notice. However this will be overruled by section 21 of the Housing Act 1988 and the usual two months notice would be required.