Assured Shorthold Tenancy Agreement
When renting out a house, many new investors wonder what is an Assured Shorthold Agreement is?
An assured shorthold tenancy (AST) is the most usual type of agreement used in residential property letting in England & Wales. This type of contract does not apply to Scotland or Northern Ireland.
An AST is sometimes referred to as a “shorthold lease agreement” the word lease can be confusing; the correct term to use is tenancy.
From 28th February 1997, all new residential letting agreements by default are (AST) unless expressly agreed in writing.
Before this date, a landlord had to serve a section 20 notice on the renter before letting the property.
From 28th February 1997, the requirement to serve a section 20 notice was dispensed with.
There are a few types of tenancies; it is essential to understand the difference between them. This article should help you know the difference between them. In addition, it is crucial landlords use the correct type of agreement.
Assured Shorthold tenancy Meaning
Let’s explore what an (AST) meaning?
This post will look more closely at what it involves and how you can correctly use this residential agreement.
The assured shorthold tenancy agreement meaning (the definition) is set out in the Housing Act 1988.
The AST was introduced under Housing Act 1988 by the conservative Government, Minister Margaret Thatcher’s brainchild. However, the word “Assured” does offer some security of tenure to renters.
The tenant is assured an agreed set term to occupy the property provided the renter sticks to the terms & conditions of the agreement. The term for an AST commonly is between 6 months to 2 years. The contract can then be extended if both parties agree.
The tenant has the surety to occupy the property for the agreed term. The owner is entitled to vacant possession after the fixed term expires.
A private landlord is responsible for doing repairs under an AST set out in part 11 of the housing Act 1985.
When should you use an Assured shorthold tenancy?
The housing Act 1988 sets out what residential tenancy can be an AST, and which cannot. Ordinarily, it should not be used if the landlord lives in the same property as the renter. This is because the renter does not have exclusive possession of the dwelling.
An AST is often used when the landlord does not live in the let property; it is not his main principal home.
ASTs cannot be used for business holiday lets or for lodgers living in your home. In addition, if the rent is below £250 a year (or £1,000 in London) or above £100,000 per year, it is then not capable of being an (AST).
Can you give a more extended tenancy period?
AST’S usually start off with, say, a 6- or 18-months contract. However, if the renter is happy to remain in their home and the landlord is satisfied with the tenants, the tenancy can be renewed.
Alternatively, both parties can leave the residential tenancy to run and remain a “periodic tenancy” when the fixed term expires.
A landlord can grant a more extended contract up to 7 years; however, this is rare. If a more extended agreement is going to be given, then the tenancy should have a break clause.
The benefit of a break clause is should the renter breach the terms of the tenancy. The contract can be terminated under the section 21 route by invoking the break clause.
If granted a more extended contract, then you should always have a break clause,
How to create an Assured shorthold tenancy
An AST is a legal binding contract between the landlord and the tenant. Therefore, the tenancy must be drafted correctly to ensure appropriate clauses are in place to avoid contention in the future.
Errors in the contract can lead to problems with the tenant not paying the rent or difficulty evicting the tenant.
A good contract should have all the relevant clauses to safeguard the tenant and landlords’ rights.
A tenancy unfair or heavily weighted towards the landlord may be considered an unfair contract under the Unfair Terms in Consumer Contracts Regulations 1999.
The tenancy must deal with all aspects of the responsibilities of the renter in respect of damage.
Especially when it comes to dealing with the deposit.
Without a good tenancy and an inventory, it could make it harder to deal with the deposit, especially if there is damage to the let property.
AST should provide a signature strip where all the parties can sign. For example, suppose you have a letting agent. In that case, generally, the letting agents can sign the document on behalf of the landlord.
Pre-Checklist
Credit & Referencing There is no legal requirement to have a credit & reference check done. However, one should be done before letting rental properties.
The credit and reference report will check the identity of the prospective tenant. In addition, it will flag up any adverse credit history like CCJ’s or bankruptcy. It will also check the electoral roll along with the right to rent.
You will need to consider the rent payment frequency if the rent will be paid weekly or on a month-to-month basis.
It is a good idea for all parties to provide an email address. This can be written in the AST so the parties can communicate efficiently. In addition, email seems an excellent way to communicate and record keeping if the renter wants advice on appliances or repairs.
Right to Rent
Right to rent was introduced on 1st February 2016 and is a legal requirement before letting a property.
The right to rent is a check a landlord or letting agent must do to ensure all prospective renters have the right to remain in the UK.
Checks must be conducted on all prospective renters, not just those who may look as if they are foreigners.
Tenant Fee Ban
From 1st June 2019, when the Tenant Fees Act came into effect, it is illegal for a letting agent to charge tenants fees like credit checks or draft a tenancy.
This legislation also limits the amount of deposits that can be taken. The tenant fee ban applies to new or renewed (AST’s). This is a considerable help to renters as the upfront fees to move into a rented property is reduced.
Importance of an Inventory
Legally, it is not required to have an inventory when letting a property. However, it is strongly recommended you have an inventory before the tenant takes possession of the property.
An inventory is evidence of the condition of the property when letting and vacating a rented home.
The inventory plays a crucial part when the tenant vacates and damages the let property.
An inventory is critical to safeguard both the tenant and landlord.
An inventory should reference the agreement and be attached as an appendix. You can download a free tenancy inventory template, Tenant Deposit Protection.
If you are taking a deposit from your renter, it must be protected in a government-approved tenant deposit scheme. If not, it may be difficult to evict the renter should it be necessary.
If the deposit was not protected within 30 days of taking the deposit. Alternatively, if the renter was not given the deposit certificate or the deposit prescribed information within 30 days.
Any section 21 notice served on the tenant to regain possession of the property will be invalid. In short, you will not be able to regain possession of your property.
You can protect a tenant’s deposit through the BLA using DPS, a discounted service for members.
There are 3 tenant deposit scheme providers, and they are DPS, TDS, and My Deposit.
Gas Safety Certificates
A Gas Safety check must be done each year by a safe gas engineer. Certificates must be provided to the tenant by law. All gas appliances need to be checked when the yearly gas check is conducted.
If they are not, it may be difficult to evict the tenant. Therefore, gas safety checks are crucial and must be done every year without fail.
EPC Energy Performance Certificate
From 1st April 2018, all rented property (both domestic and non-domestic) must have an EPC rating of at least “E”.
This requirement also applies to renewal tenancies on or after 1st April 2018. You can order a discounted EPC from the BLA service provider if one is required.
Smoke Alarms
You will require working smoke alarms, and these may have to be interlinked. How many smoke alarms, where they need to be fitted varies depending on the dwelling.
You may also require carbon monoxide alarms. Smoke alarm guidance for landlords.
Before renting, you should do a visual risk assessment of any residential property. Check things like broken light fitting, power sockets and electrical appliances.
If you are providing a portable appliance, ensure they have been checked and certified as safe.
Electrical safety inspection (report) checks (EICR)
Under the Landlord and Tenants Act (1985), landlords must ensure that the electrical installation in a rented property is maintained safely throughout a rental. To ensure this is done at least every 5 years.
You can read more on the Electrical Safety inspection report (EICR) here. The ‘How to Rent Guide Landlords are required by law to issue renters the latest version of the Government’s official How to Rent guide.
Not giving this to the renter will mean the landlord will not be able to serve a valid section 21 notice unless one has been served.
Assured Shorthold Tenancy Agreement Template Download
There is no prescribed Assured Shorthold Tenancy Agreement Template. There is a variety of different model agreements landlords and letting agents use.
Rather than creating your own, it can save time and hassle to use a ready-made template AST.
The British Landlords Association provides templates for Various versions of Assured shorthold tenancy agreement documents for members and non-members to download.
When you enter into an agreement with a tenant, you are legally obligated to do several things, while not legally needed, which are, nonetheless, best practices.
Here we will run through several of them, but please note that this is not an exhaustive list, and if you are unsure, we suggest you speak to our member helpline.
Joint Tenants Where renters take on a joint rental agreement as to joint tenants, they are both joint & severally legally liable for that contract.
This is good for the accommodation owner if one renter defaults. Then, the owner has the other renter to fall back on to call a debt.
Suppose you are considering renting accommodation as a renter. In that case, you should consider if you really want to be a joint tenant.
What is a tenancy guarantor?
A person who contractually guarantees the make good any breaches under the tenancy obligations of the tenant.
These can be losses due to rent arrears or damage to the property, including court and legal fees known as a tenancy guarantor.
Terminating the agreement If you wish to end the AST before the end of the fixed term. This can only be done using a section 8 notice or invoking a break clause if one exists.
You can also use the section 21 route if the fixed-term contract is close to an end or if the tenancy is periodic. The section 21 notice is the same if the tenancy is periodic or still within the fixed period.
The Section 21 process for ending a tenancy can be used to regain possession for the very reason the fixed period has come to an end.
A landlord does not require a specific reason to end it. Sometimes the section 21 process is called or known as a no-fault eviction.
There are several specific requirements for issuing a Section 21 Notice when using the eviction process.
Changes to the law – made in October 2018 – now mean that it is necessary to use a prescribed 21 form, also known as form 6A.
Section 8 Notice
The Section 8 process is used when the landlord wants to end the contract and has grounds for doing so. These section 8 Notice grounds typically can be varied due to the tenant having broken a specific term of the AST.
Common grounds for using Section 8 Notice to Quit are that the tenant is in arrears, damaged the property, or engaged in anti-social behaviour/being a nuisance to neighbours.
The usual grounds used under section 8 notice are grounds 8,10 & 11. These are used when the landlord has not received the rent and the renter is in rent arrears. In total, there are 17 grounds for eviction under the section 8 notice.
The British Landlords Association site provides several section 8 notices with various grounds.
The tenant can defend the section 8 process due to disrepair or breach of the deposit legislation. The landlord can only evict the tenant if the court grants a possession order. You can download a free section 8 notice template for Periodic tenancies.
Most landlords are likely to be involved with periodic tenancies at some stage. A periodic tenancy runs from month to month, rather than one being for a fixed term.
When an AST reaches the end of its term and is not renewed for another fixed period, 6 or 12 months.
Assuming no notice has been given by either party, the contract will continue as a periodic tenancy, usually by the mutual agreement of both parties.
Under a periodic tenancy, the landlord can serve a section 13 notice to increase the rent. However, the renter does not have to agree to the rent increase; section 13 notice is a counter-notice.
Other Types of Tenancy Lastly, it is worth considering that you may come across different tenancy types like:
Regulated tenancies
These were typically used before 1989 and give tenants long-term tenancy rights subject to fair rent. These are generally much lower than market rents and can only be increased according to a pre-determined set formula.
Assured tenancy
An Assured tenancy is what the council and social landlords like housing associations use. Assured contracts are indefinite contracts with no end date.
You cannot use a section 21 notice for an Assured Tenancy as it has no end date. However, you can use a section 8 notice for assured tenancies.
Private residential landlords should not use an Assured Tenancy without seeking legal advice first. This is because they give renters long-term residence rights, but the rent is not regulated.
Company let Agreements
These come under various names common law tenancies, rent to the rent agreement, residential business tenancy or business tenancy.
Excluded Tenancies (Also Known as Licences)
These are usually used for lodgers, i.e., the property owner must be living in the same house, and they give the limited tenant rights of occupation.
Therefore, it is crucial to determine what constitutes a Licence.
The notice period for lodgers is usually a months’ notice.
However, due to COVID-19, the coronavirus Act has extended the notice period for the eviction process under emergency legislation. Therefore, you should check what the correct notice period is before giving the notice to the lodger.
It does depend on what accommodation is rented in the building to the renter. What is shared, and what is exclusively for the use of the renter.
Author: Amanda Goldsmith [email protected]
Date: 1st of January 2024
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Disclaimer:
This post is for general use only and is not intended to offer legal, tax, or investment advice; it may be out of date, incorrect, or maybe a guest post. You are required to seek legal advice from a solicitor before acting on anything written hereinabove.
