Yesterday (25 March) saw the publication on the OPSI website of the The Assured Tenancies (Amendment)(England) Order 2010 which amends Schedule 1 of the Housing Act 1988. Despite the long name this order performs the simple task of amending the maximum rent level permitted under the Act from £25,000 to £100,000.
Since, 1990 there had been a provision in the Housing Act 1988 stating that tenancies where the annual rent exceeds £25,000 shall not fall under the Act. This has led to some confusion and a number of iniquitous situations such as Assured tenants having their rent increased to over the threshold and immediately losing their security of tenure. Over time, as the rental market has moved the figure of £25,000 has become increasingly anachronistic. The Rugg review suggested that the threshold be increased and in their response the Government stated that they would do this and stated that they would increase the figure to £100,000 under powers to do so given by section 1(2A) of the Act. The Order makes use of this power to make the amendments.
Therefore from 1 October tenancies that would have previously been outside the Act by reason of their rent exceeding £25,000 will fall within the terms of the Act and will, in most cases be, ASTs. New tenancies will, of course, now need to have their deposits protected in accordance with the requirements of the Housing Act 2004.
There are some potential problems however, which are mainly created because the legislative change applies not only to new tenancies after 1 October but also to any existing tenancy. Therefore tenancies that are already in place on 1 October which are not within the Housing Act 1988 because the rent is over £25,000 will magically find themselves enjoying Housing Act protection. I can see three main areas of difficulty.
- Tenancy Deposits- Tenancies that convert to ASTs on 1 October will have had tenancy deposits taken on them prior to that date. Those deposits will not have been protected with a tenancy deposit scheme within 14 days of receipt. Leaving aside the various arguments about whether the time limits apply there is a degree of uncertainty caused by this. It is probably the case that the deposits will not need to be protected as they were taken at a point when protection was not required and it is usually the act of taking the deposit which is seen as the trigger for protection. However, when those tenancies are renewed the money will presumably need to be protected. In any case there will doubtless be another burst of tenancy deposit litigation.
- Breach- Where a forfeiture case is proceeding in the Courts for forfeiture an argument could potentially be made that the proceedings are ineffective as a section 8 notice has not been served. This argument should be wrong as the issuing of forfeiture proceedings actually brings the tenancy to an end and this would have been correct at the date of issue. Therefore on the day of the hearing the tenancy would be over and therefore not a Housing Act tenancy so the section 8 notice requirement would not apply. The other counter would be that the Court has the power to dispense with service of a section 8 notice in relation to discretionary grounds for possession.
- Finally, where a tenancy is due to end shortly after 1 October there will not be sufficient time to serve a section 21 notice giving two months notice to the tenant that the landlord requires return of the property. Of course, such a notice could be served before 1 October but it could be argued that it was not effective at that point because the change had not occurred. However, as there is no prescribed form for a section 21 notice this point may well be irrelevant. There is nothing to stop a landlord from giving notice in any type of tenancy that he require possession back and if such a notice satisfied the requirements of section 21 it would presumably be effective for that purpose too.
Leaving aside the problems it will undoubtedly be the case that a number of landlords and agents will totally fail to spot the changes and so there will be a lot of possession actions failing in the Courts after 1 October.