Currently, Assured Shorthold Tenancies (‘AST’) can be for a fixed or periodic term. The distinction is made below:
- Fixed term tenancy – The tenant is liable to pay rent for a pre-defined period. At the end of the tenancy, the landlord and tenant can agree to renew for another defined period, move to a periodic tenancy or serve notice to vacate.
- Periodic tenancy – The tenant can be evicted or may choose to leave at any given time.
The current AST structure has been classed as ‘inflexible’ in the Government’s note: A New Deal for Renting consultation, as it does not allow for tenants to vacate the property if needed, instead locking them into contracts.
The Leasehold Reform Act (‘the Act’) will affect landlords as they will only be able to end a tenancy in certain circumstances which will be defined by law.
The Act seeks to strengthen the protections for tenants.
The Act will transfer Assured Shorthold Tenancies onto a single system of periodic tenancies – with no fixed terms. Tenants will have the ability to end a tenancy at any given point but will need to provide the landlord with 2 months’ notice in order for them to recoup their costs in finding a new tenant.
The landlord will be required to provide a digital or physical written tenancy agreement. This must set out the below as a minimum:
- Start date of the tenancy
- Rent level
- Landlord’s address
- Rights and responsibilities of both parties
Failure to comply with the above may lead to penalties being imposed on landlords of up to a maximum of £30,000.
Under the new Act, landlords will no longer have the ability to evict tenants where there is ‘no fault’, and will no longer be able to regain repossession of their property under section 21 of the Housing Act 1988. Instead, they will be able to rely on the strengthened provisions under section 8. This will only apply once a tenant has been in the property for at least 6 months, landlords will have the ability to repossess the property, for example where a tenant is displaying anti-social behaviour, or if the landlord seeks to sell their property or move into the property.
The new grounds for possession for a landlord are further detailed in the government consultation note.
In addition, under the Act, Landlords will only be able to increase the rent once a year. This is to prevent landlords from using rent increases to evict tenants. Agreements which enable more than one increase to the rent outside of the law, will have no effect.
These reform proposals when implemented will affect landlords and tenants when seeking to rent out a property.
Please get in touch with our Commercial Property Team if you would like further information about the leasehold reform proposals by calling 0161 330 6821 or emailing bromleys@bromleys.co.uk.