Assured Shorthold Tenancy Agreements

(The Housing Act 1988 as amended by the Housing Act 1996)

Background:

The Housing Act received royal assent on 15th November 1988 after considerable debate, keeping Parliament occupied for a total of over 250 hours.  The issues were at times bitterly contested by the opposition parties as the provisions laid down in the Act were far-reaching.   The Rent Acts had for many years kept a firm stranglehold on rent levels and the general freedom of landlords.  Part I of the new Act heralded a fresh and market-oriented approach to the legal relationship between landlord and tenant, and through the Assured Shorthold Tenancy, provided a means whereby the landlord could be certain of his right to repossess his property.  Familiarity with the essential requirements and provisions of the Act is important to the property professional who is frequently called upon to draft letting agreements or amend standard forms.

Definition of an assured shorthold tenancy:

An assured shorthold tenancy is a kind of assured tenancy which offers the landlord a guaranteed right to repossess his property at the end of the term.  In fact, it does not necessarily have to be 'short'; assured shorthold tenancies set up after 28 February 1997 can be for any length of time the landlord wishes to offer.  The assured shorthold has the following important features:

•  It is now the automatic or default form of tenancy for most residential tenancies

• The landlord has a right to get his property back at the end of the tenancy (although a court can still not award possession during the first six months if a tenant refuses to leave).

N.B. Prior to February 28 1997, the first tenancy had to be for a fixed period of at least six months; with no power for  the landlord to terminate the tenancy before this time, and the landlord was required to serve a Notice of Assured Shorthold tenancy on the tenant in the proper form.

The landlord and tenant can freely agree the rent but the tenant does have the power in certain circumstances to refer the rent to the rent assessment committee.

Can I use an assured shorthold tenancy ?

The Housing Act laid down some important requirements for assured and assured shorthold tenancies.  Some of the key requirements are:

• the tenant is an individual

• the dwelling is let as separate accommodation

• the dwelling is the tenant's main or principal home

There are a number of important exclusions (i.e. tenancies that cannot be assured or assured shorthold):

• Lettings to companies

• Lettings at no rent, low rent or high rent (over £25,000 per annum)

• Holiday lettings

• Tenancies granted by a resident landlord (a landlord who lives in the same property as the tenant)

• Tenancies of property let with more than two acres of agricultural land, or an agricultural tenancy.

• Tenancies entered into before 15 January 1989, or a tenancy that was previously a protected tenancy.

Tenancies in the excluded categories above will generally be known as 'common law' or 'contractual' tenancies and an assured shorthold tenancy agreement will not be suitable.  Other forms of agreement for these types of tenancy are available from the Letting Centre.

The Shorthold Notice:

For tenancies created on or after February 28 1997, there is no longer any requirement to serve the tenant with a prior notice of assured shorthold tenancy (the 's20 notice)'.

Completing the tenancy agreement:

The usual practice is to for the landlord (or agent) to prepare two duplicate copies of the agreement ready for signing; these are called the Original and Counterpart.  When completing the standard form, all details, signatures and dates must be completed on both documents in ink, by hand or typewritten (not pencil).  All parts of the form should be completed clearly fully and unambiguously.  Should a court be called upon to interpret the agreement, it might uphold the contra proferentem rule where ambiguity is resolved against the party preparing the agreement or else conclude that those parties had still to reach agreement concerning those uncompleted portions (in which case, the agreement as a whole might be declared void).

Completion details:

Date: enter here the date when the agreement was made between the parties.  If the agreement is to be signed by the parties at different times, the date of the first signature can be used.

Landlord: enter the name(s) of the landlord(s).  If the property is jointly owned, include all names.

Tenant(s):  likewise, enter the name(s) of the tenant(s).  The full name(s) of the tenant(s) should be completed on the agreement.  Where there is a joint tenancy, all joint tenants should be listed.

Property: the property or dwelling being let should be accurately defined within this section of the agreement such that the address or description fully identifies the property and is free from ambiguity.

Term: since the changes introduced by the Housing Act 1996, an assured shorthold tenancy need not now be a term certain of at least six months - it can be any length of time.  If the fixed term is to exceed three years, then the agreement must be drawn up by deed (consult your solicitor for details).

Rent: the agreement should clearly state the amount of rent payable, and the frequency of the payments (the rental period).  Generally, the rental period would be monthly although the rent could validly be expressed as a weekly or quarterly amount.  If weekly, then a rent book must also be supplied. If the rent exceeds £25,000 per annum, then the tenancy may not be assured shorthold (see above).

Signing

Where the landlord has instructed an agent to let the property and draw up the tenancy agreements, the agent may wish to sign the tenancy agreement on behalf of the landlord (especially if the landlord is overseas or otherwise uncontactable).  In this situation, the agent is advised to check that such instructions or management agreement give the agent express authority to sign the agreement on behalf of the landlord.

Witnesses

Letting agreements often make provision for a witness to also sign the agreement.  This is a reasonable safeguard against the situation where a person denies ever signing or being shown the agreement in the first place although under English conveyancing law, it is not compulsory to use a witness when signing a tenancy agreement, unless the agreement is executed as a deed (i.e. term is over three years).  However, it is a good precaution to ask a colleague or some other third party to witness the signing of the tenancy agreement in your office and this will provide the landlord with added security in case of a dispute.

Stamp Duty

Stamp duty was payable on all leases until December 2003. The rules relating to Stamp Duty Land Tax (SDLT) which apply from December 2003 are set out in Letting Factsheet 32.