If you’re a new landlord, one thing you’ll need to know about is assured shorthold tenancies.
Here, we’ll explain what an assured shorthold tenancy is, how it works and run through the rules associated with this kind of tenancy agreement…
What is an assured shorthold tenancy?
Assured shorthold tenancies (ASTs) are the most common form of tenancy agreement used by landlords in the UK.
Since 1989, assured shorthold tenancies have almost completely replaced the previously used assured tenancy agreement due to the additional rights an AST gives landlords.
For a tenancy agreement to be classed as an AST:
• It must have started after January 15, 1989
• The landlord must not live in the property alongside tenants
• It must be issued to private tenants or a group of private tenants
• It must give the tenant or tenants at least six months right of occupation
• The annual rent must be no more than £100,000
• It must be the tenant’s main or principal home, hence not suitable for Company tenants
What is the difference between shorthold tenancy and assured tenancy?
The main difference between an assured shorthold tenancy (AST) and an assured tenancy is that you’re able evict your tenant at the end of their fixed term agreement without providing a reason for doing so.
Under an assured tenancy agreement, widely used prior to 1997, tenants had the right to remain in the property unless the tenants breached the Agreement.
How long does an assured shorthold tenancy agreement last?
Assured shorthold tenancies (ASTs) must have a fixed term agreement between you and your tenant, which is usually six months or 12 months, but can be longer.
This means you’re unable to seek vacant possession during this fixed term unless the tenants breach the agreement.
At the end of the fixed term, you can serve your tenant with a section-21 notice, giving them a period of time to vacate the property should you wish to regain possession.
An AST becomes a periodic tenancy if your tenants continue to rent the property without agreeing to a new fixed term and continue to pay rent.
You remain able to serve a section-21 notice at any point during a periodic tenancy, although rules during the coronavirus pandemic mean all tenants must be given at least four months’ notice.
Some fixed term ASTs contain break clauses, where either you or your tenants are able to end the agreement early.
These break clauses usually come midway through the fixed term agreement, so in the case of a 12-month fixed term, a break clause may be in place after six months.
What is the maximum rent for an assured shorthold tenancy?
A tenancy can’t be an assured shorthold tenancy (AST) if the annual rent exceeds £100,000.
If the annual rent is less than £250, or £1,000 if in London, the tenancy also cannot be an AST.
What landlords must do under assured shorthold tenancies
If you issue your tenant with an assured shorthold tenancy agreement (AST), there are a number of obligations you must fulfil as a landlord.
• Issue your tenant with a written statement of terms, including the start date of their tenancy, the rent payable and the day rent is due, the length of the fixed term agreement and any break clause
• Give your tenant your name and address
• Issue your tenant with a valid gas safety certificate before they move in
• Issue your tenant with a valid Energy Performance Certificate that has a rating no lower than ‘E’
• Issue your tenant with a copy of the government’s How to Rent guide
• Protect your tenant’s deposit in one of three approved schemes and serve the relevant prescribed information
• Issue your tenant with a valid Electrical Installation Condition Report (EICR)
What landlords can’t do during an assured shorthold tenancy agreement
If your tenant is within the fixed term of an assured shorthold tenancy agreement (AST), you cannot:
• Seek possession of your property without a valid reason and even then, after due process of Law
Assured shorthold tenancy notice periods
At the end of an assured shorthold tenancy (AST) fixed term, you can issue your tenant with a section-21 notice if you wish to regain possession of your property without having to cite a reason.
The standard notice period for a section-21 eviction notice prior to the coronavirus pandemic was two months.
However, since August 29, 2020, under the Coronavirus Act, landlords have been required to give six months’ notice to tenants, unless:
• A section-8 notice of eviction is served due to rent arrears of more than six months. In this case, a four-week notice period is permitted
• The tenant is in breach of rules on immigration
• The tenant has breached their AST through anti-social behaviour or domestic abuse. In this case, a two-month notice period is permitted
From June 1, 2021, the six-month Covid-19 eviction notice period will reduce to four months, both for section-21 evictions and section-8 evictions where the tenant is in breach of their AST.
If you’re thinking of investing in property and becoming a landlord, take a look at our guide which explains everything you need to know.
And once you’ve taken that step, finding good tenants and keeping them is key – we’ve outlined the things you can do to keep your tenants happy here.