Long Term AST – My prospective tenant has asked for a tenancy term of 6 years. Can I use the usual Assured Shorthold Tenancy agreement for this?
The Assured Shorthold Tenancy is the default tenancy for residential lettings and since October 2010 this applies to rents up to £100,000 pa. ASTs give the landlord an automatic right to regain possession after tenancy end, or any renewal period, subject to an initial minimum term of 6 months.
The tenancy does not have to be “Short” – it can be for any length of time landlord and tenant agree, subject to a maximum of 21 years, after which you are into the realms of long leases at low rents – another story altogether.
However, there are some serious considerations for landlords (and tenants) who grant (or accept) tenancies for longer terms.
Up to 3-years a tenancy agreement can be oral or in writing and it does not need a witness, though landlords often like these agreements witnessed. Over 3-years and it is technically a lease, which must be in writing, must be signed as a deed and formerly witnessed.
Over 7-years and the lease title must be registered with the Land Registry, professionally preparing floor plans will be required, certain prescribed terms in the lease are needed, and stamp duty may be payable subject to some complex calculations of the net present value of the total rent to be collected over the term. These provisions are destined to come down to 3-years in the future.
A rent review clause should be inserted into any longer-term lease as the provisions for rent review in the 1988 Housing Act are not applicable during the fixed term.
The tenant obviously wants long-term security so would perhaps object to landlord’s break clauses, but landlords should appreciate that unlike long-term commercial tenancies, where forfeiture can be used, you can be stuck with a problem tenant for a very long time. Although breach of contract (Section 8) procedure is available, this does not always give possession.
A 6-month term is often a wise starting point for the landlord with a new untested tenant as the landlord’s losses are minimised should problems arise – the landlord knows that there is an absolute right to possession using the Section 21 route and providing the 2-month notice is served within the fixed-term, possession proceedings can begin after the last day of that term.
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