What is an Assured Shorthold Agreement?
An assured shorthold agreement is a tenancy agreement, the main difference between this and a standard tenancy agreement is that the landlord can repossess the property without having to give a specific reason. A tenant cannot claim security of tenure in relation to the property and the landlord must give only 2 months’ notice of possession. An assured shorthold (AST) is the most common type of tenancy agreement in private residential property rentals.
In order for a tenancy to be classed as an assured shorthold, the following criteria must be met –
• The tenant must not be a company
• The tenant must be an individual or individuals
• The rent does not exceed £100,000 per year (in London – in other areas £25,000 per year)
• The rent must not be more than £250 per year
• The property is let as a separate dwelling
There are two types of assured shorthold tenancies:
• On-Licence – an on-licence AST is where there are more tenants than there are bedrooms . The landlord still collects rent, but does not carry out maintenance and repairs and the tenants are all known to each other.
• Room Only – where the tenant pays for the room and also pays for meals, laundry etc to the landlord. The landlord is not responsible for looking after the property and the tenant doesn’t have exclusive access to the room.
Assured shorthold agreements are normally used for six or twelve month purposes but, under current legislation, there is no maximum time limit and landlords and tenants can make a deal amongst themselves.
The Legal Background and Protections
Assured shorthold agreements are a form of contractual relationship between a landlord and a tenant for the purpose of granting possession of a residential property in return for rent. The legal framework for assured shorthold agreements is contained within the Housing Act 1988 (as amended by the Housing Act 1996). Under the terms of the Housing Act 1988, most residential agreements granted after 15 January 1989 will be deemed to be an assured shorthold agreement unless the landlord mandates otherwise. The Housing Act 1988 (Prescribed Requirement) (England) Order 2007 sets out the requirements for the prescribed information that must be provided to a tenant before or on signing the agreement. The requirements state that a landlord is legally required to provide his tenant with the following documents:
The Housing Act (Rent Notices) (England) Regulations 2006 makes provision for rent notices to be served and provides a basis for calculating which rent period is applicable. Where a tenancy falls within the definition of an assured shorthold tenancy, the provisions of the Housing Act 1988 must be followed when determining the procedure for terminating the tenancy. The provisions allow for the landlord to serve a 2 month notice seeking possession of the property. The notice must be addressed to the tenant and must be given to either the tenant or any person who lives at the property and who appears to the landlord to be in charge of the property. The provisions of the Housing Act 1988 are superseded by the provisions of the Housing Act 1985, where the industrial tribunal process is used to seek possession of the property. Care should be taken by the landlord to ensure that the correct procedure is followed in each case. Landlord and Tenant covenants will also apply to most assured shorthold agreements as they would with other landlord tenant agreements.
Key Elements of the Agreement
An assured shorthold agreement will typically contain information including important clauses such as rent terms, deposit details, and termination conditions. The following key components are essential.
Rent terms
The rent terms regulation state that the landlord must provide the tenant with information regarding when the rent is due and how it is to be paid as well as any additional charges that they may be liable to pay. If the rent is reviewed annually this must be highlighted in the agreement, along with the way in which it is being reviewed i.e. market rent increases, reviewed against the Retail Price Index. They must be given all details in relation to any increase in rent whether it is by fixed amount or otherwise and the date it will take effect.
Primary and Secondary deposit protection information
It is an offence to fail to protect a deposit, and if the landlord fails to do so, and the tenant takes them to court for the return of their money, the court must make an order for it to be returned. However, the landlord might also have to pay back up to 3 times the deposit amount for the breach. For this reason, it is very important not to overlook this.
You can comply with your legal duty by using a subscriber to one of the two Government-approved primary Dispute Deposit Protection Schemes, and registering the deposit within 30 days through their website.
Alternatively, (for landlords who may want to hold the money themselves) you can choose a secondary scheme. If you choose this option, you will be required to agree to repay the money to the tenant or place it into a Scheme within a specified period of time (e.g. three days), or alternatively, provide them with the contact details of the Scheme which they can join. As the landlord is holding the property, they have full responsibility for the security and any repayment. This means that any outstanding rent arrears/damages will be taken from the deposit amount prior to repayment, therefore the landlord has the responsibility to ensure that the correct amount of money is returned to the tenant which would be proven through an independent inventory report.
Tenancy Period and/or Termination Provision
The tenancy period can be for an initial fixed-period of 6 months or longer; if a tenant has occupied the property for that amount of time, then the let will be an assured periodic. In this case, notice must be given by the tenant following the court procedure to regain possession of the property. The landlord must have a valid ground for termination and serve a notice requesting possession giving appropriate amounts of notice under Section 8 of the Housing Act 1988 or Section 21 of the Housing Act 1988.
Landlords’ Rights and Obligations
As the landlord or estate agent, you are responsible for making sure that some specific obligations under the agreement are fulfilled.
The Dwelling
Even though you will have an agreement with the tenant, you still need to provide the agreed property which they can occupy and use as a full time residence. You should ensure that safety requirements are met (for example, that gas and electrical appliances are safe) and that the property is secure. You must ensure the area is safe; if the property has building works or communal areas, it must be made clear from the outset that although the resident may have access, they should avoid it.
Value of Rent
Whilst you have to allow the tenant a right to quietly enjoy the property, you do have a right to receive the rent which is provided by the tenant in a timely fashion. You can arrange for the rent to be paid by standing order, or just make it clear to the tenant what and when should be paid. You are obliged to collect rent if payment is due but you may not be able to access the property without giving notice to the tenant, which means that collection should be done with the utmost consideration to the tenant. If payment has not been made you must still arrange a time for a collection service to be offered for the tenant to pay.
Repairs
You also have a duty to repair and replace things in the property which become unsafe during the tenancy. Any damage to the building itself is usually your responsibility. The condition of the property is something that should also be addressed. Of course, if the damage has been caused by a third party outside of the individual’s control (for example, flooding if it hasn’t rained in the last few weeks or a plane crashing into the roof) you wouldn’t be expected to be liable for the damage. If there is a problem with the property you must address it straight away. You should always try to offer your tenant alternative accommodation if the house has become damaged beyond occupancy as it is your responsibility to put them in temporary housing and pay all associated costs. However, as you are primarily a landlord and not an emergency service, the duty is proportionate; you do not have to offer the Ritz-Carlton if an emergency hotel is more realistic. Damaged caused by the "wear and tear" of the property is normally considered the responsibility of the landlord. If wallpaper is peeling or paint is coming off because it’s old or hasn’t been repainted for a number of years, it would be unreasonable to expect the tenant to pay for this. Modern buildings should be weather resistant, and therefore, weather damage should not occur. This again applies where the property is used as a full time residence by the tenant. If a storm during your tenant’s time living in the property has caused this, it is important to keep photographs and investigate how the storm has damaged the property. You may wish to speak to an insurance company if this is the case. The exception to this could be if a natural disaster has occurred outside the boundaries of the property.
Tenants’ Rights and Responsibilities
As a tenant, it is important to know that you will have the right to live in your property in relative peace and that your right to privacy is protected. You will also have the right to have the property kept in good condition throughout your tenancy and you can expect your landlord to fix any problems fairly rapidly under a legally binding obligation, although there are some exceptions. And of course , you always have the right to live as a secure tenant for the length of time specified in your assured shorthold agreement – and you will have recourse to the courts if your landlord interrupts your tenancy by refusing to accept your rent payment or unlawfully entering and using the space you have rented.
As a tenant, you have a number of important responsibilities too. You have an immediate legal responsibility to pay rent regularly and on time. If you fail to pay the rent or keep to any other clause in your agreement, you stand to lose your home.
Termination of an Assured Shorthold Agreement
You can end an assured shorthold agreement for the following reasons: If you want to end it because you are the landlord, you must give the tenant two or four months written notice, depending on whether you have given the required notices for an excluded tenancy or a non-excluded tenancy. If you want to evict the tenant for any reason other than breach of the agreement you must apply to the court for possession. If you are the tenant and want to leave you must give notice in accordance with your tenancy agreement. You cannot leave at any time as some visitation and surveys may be required upto the end of the contract term. If the tenant is in breach of the agreement you must give a warning in writing and then, after he is given time to remedy the breach (which must be reasonable) you can get a court order for possession.
Typical Disputes and Dispute Resolutions
Disputes involving assured shorthold tenancies (ASTs) frequently arise from matters such as: Any of the above disputes can be resolved through negotiation, mediation, or court actions. Mediation is usually the most preferable method of resolving disputes, as it is both cost-effective and likely to result in a mutually beneficial agreement between the parties. The mediation process involves an impartial third-party acting as a go-between for the landlord and tenant , seeking to draft a solution that suits both parties and can be agreed to by both of them. The alternative to mediation is formal court proceedings. Proceedings in either the Civil or the County Court may be necessary to resolve disputes involving ASTs, most often when landlords seek possession of a property or tenants seek disrepair orders or injunctions to force a landlord to make repairs to a property.
