AST over 25k – My tenant signed an AST which ends on the 15th of September, though I am now told this is not an Assured Shorthold Tenancy, as the rent is over £25,000. The rent is now 2 months’ in arrears and the tenant says he is not leaving but will hold-over for 3 weeks. Where do I stand and what about the deposit?
The fact that your tenant signed an AST agreement does not necessarily make it an AST, but nevertheless the agreement and its terms can still be a valid.
It’s the situation that counts: with rent above the £25K limit, your tenant was a common law (contractual) tenancy, not an AST. Common law tenancies are not governed by the Housing Acts, so you are not obliged to protect the deposit.
However, your situation is complicated because from 1 October 2010 all existing contractual residential tenancies with aggregate (applies to multi-let houses) annual rents (or equivalent) between £25k and £100k will become Assured (shorthold) Tenancies (The Assured Tenancies (Amendment)(England) Order 2010).
Contractual tenancies can be ended by the landlord serving a Notice to Quit, following any specified notice period in the agreement, but usually one month’s notice where rent is paid monthly. Alternatively, in the case of rent arrears, a forfeiture procedure can be used.
This situation is further complicated by the fact that it is impossible to complete the notice period or forfeiture procedure before the tenancy becomes by default an AST after 1st October.
The Statutory Instrument leaves much uncertainty as there were no transitional provisions, so pending further guidance it is not clear what would happen here. All you can say it that a correctly served notice to quit that expires after October 1 should end the tenancy, providing no rent is accepted after the end of the fixed term (You could sue for outstanding arrears as mense [pronounced “mean”] profits at a later date).
You have two options as I see it: attempt to end the tenancy in this way and hope for the best, or accept that it becomes an AST.
There is still some debate about whether the deposit must be protected in these circumstances: s213(1) Housing Act 2004 states that a deposit received in connection with a shorthold tenancy must be protected. This deposit was not received as a shorthold tenancy!
However, if you do allow this tenancy to become an AST by default, it is perhaps prudent to protect the deposit and serve the correct notice on your tenant.
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