Assured Shorthold Tenancy Agreements
Introduction to Assured Shorthold Tenancy Agreements
An Assured Shorthold Tenancy Agreement is the most frequently used tenancy agreement in the letting of residential properties. This type of agreement is also referred to as an "AST" or "Shorthold Tenancy".
Assured Shorthold Tenancy agreements are normally arranged for a six month period, but can be agreed for a longer period, e.g. twelve months. This type of tenancy allows the tenant to remain in the property for the first six months, or initial fixed period.
The main requirement with this type of agreement is that the landlord and tenant agree on the minimum term and amount of rent. An Assured Shorthold Tenancy ensures that the tenant is protected in terms of the sum of rent. This means that the tenant has the right to challenge excessively high rent or changes in the agreed rent. For more information on this see the section on Market Rent.
For more information on tenants' rights, see Tenants' Rights in an Assured Shorthold Tenancy.
In an Assured Shorthold tenancy, the landlord has the right to guaranteed possession after the initial six month period in accordance with the Housing Act 1988.
The Housing Act 1988 defines several main criteria for an Assured Shorthold Tenancy to be set up:
- The property must be let as separate accommodation
- The property must be the tenant’s main or principal home
- The tenant should be an individual
However, there are some circumstances in which a shorthold tenancy cannot be used. For example, when a property is:
- Being let for a very high rent (more than £100,000 per year)
- Being let for a very low rent / at no cost
- Being let as a holiday home
- Being let to a tenant while the landlord is residing in the same property
- Being let with more than two acres of agricultural land or an agricultural tenancy
- Being let under a tenancy which began prior to the 15 January 1989, or which was formerly a protected tenancy
- Being let to a private limited company
- Owned by the Crown or a government department
Since the introduction of the Assured Shorthold Tenancy in 1997, it has become the main type of tenancy agreement used by most landlords to let residential properties.
All tenancies which started on or after 28th February 1997 are now automatically Assured Shorthold Tenancies, unless the required steps were followed to set up an Assured Tenancy.
Most residential properties are let using an Assured Shorthold Tenancy, providing the property is let to an individual and is a separate property to the landlord’s. However, there are circumstances in which an Assured Shorthold Tenancy cannot be used as a form of tenancy.
The Housing Act 1988, revised in 1996, aimed to improve the rights of both landlord and tenant and to make letting property more appealing. The Assured Shorthold Tenancy was introduced and is now the most commonly used type of tenancy agreement.
The Housing Act 1996 gave tenants the right to question excessively high or increasing rates of rent, which resulted in a higher number of people choosing to rent properties.
Renting is now viewed by some as a more feasible and practical option, compatible with society’s increasingly flexible lifestyle choices.
How do you know if you have an Assured Shorthold Tenancy Agreement?
There are a number of factors which will determine whether or not an Assured Shorthold Tenancy has been agreed. You will have an AST if:
- You moved into the property on or after 28th February 1997
- You are renting from a private landlord
- You have rights which entitle you to privacy in the property where the landlord cannot enter the property without mutual agreement
- The landlord is not living in the same property as you
- You are paying less than £100,000 per annum in rent.
You may also have an Assured Shorthold Tenancy if you moved into the property between 15th January 1989 and the 28th February 1997, and the landlord made you aware that you were entering into an Assured Shorthold Tenancy agreement.
How is an Assured Shorthold Tenancy different to an Assured Tenancy?
There are two main types of tenancy agreements: Assured Shorthold Tenancies and Assured Tenancies. Assured Tenancies are often referred to as "Full" or "Ordinary Assured Tenancies".
Both these types of tenancy were introduced to promote lettings and allow landlords to charge the full market rent. The key difference between the two types of tenancy is the legislation regarding the landlord regaining possession of the property.
An Assured Shorthold Tenancy entitles the landlord to a possession order immediately after the initial agreed period, which is usually for six months. The landlord is therefore able to evict the tenant after the initial fixed term without a legal reason. If this is the case and the landlord does not wish to renew the tenancy then they are obliged to give at least two months' notice to end the tenancy.
An Assured Tenancy is considered to give the tenant more security, as after the agreement has ended the tenant can remain in the property until the landlord obtains an order of possession from the courts. The landlord needs to prove to the court the grounds for repossession, for example, the tenant has missed rent payments, or the terms of the agreement have been disregarded. The landlord is required to inform the tenant in writing if they are to seek possession of the property through a court order. The tenant is not expected to move out of the property until an order has been issued by the courts. When the tenant is issued with an order they are required to leave the property by the date shown on the court order.
Under both types of tenancy the landlord is encouraged to charge a full market rent. The market rent is dependant on rent charged for similar properties in the area and the number of properties available in the area.
With Assured Tenancies and Assured Shorthold Tenancies the tenant and landlord are required to agree on the rent at the start of the tenancy.
With an Assured Tenancy the rent must remain at the agreed rate until the end of the fixed term, unless the landlord and tenant agree to change it or rent changes are stated in the agreement.
At the end of the fixed term of an Assured Tenancy the rent can be increased, provided:
- The tenancy agreement has guidelines for rent increases
- The landlord gives written notice of the intended increase
- The landlord gives written notice of a change to the terms of the tenancy
The landlord is required to give the tenant notice of at least one rental period, which is usually one month, before increasing the rent. If the tenant challenges the increase in rent this will not threaten their ability to remain in the property, unless the landlord has other grounds on which they may evict the tenant.
With an Assured Shorthold Tenancy, the landlord may choose to increase the rent when the agreement is renewed after the initial period. If the tenant does not agree to the rent increase, the landlord may choose to evict the tenant rather than forego the required rent increase. If the tenant wishes to remain in the property, it is often the case that they agree to the rent increase.
Both Assured Tenancies and Assured Shorthold Tenancies enable the tenant to refer excessively high rents to the Rent Assessment Committee during the first six months of the tenancy. The Rent Assessment Committee is independent of both local and central government and usually consists of three people: a lawyer, a property valuer and a lay person.
The aim of the committee is to decide on a reasonable market rent for the property being let. The rent charged for similar properties in the area let on Assured Tenancies and Assured Shorthold Tenancies will be analysed to enable the committee to reach a decision. The market rent set by the committee will then be the highest legal rate the landlord can charge.
There are six rent assessment panels in England and Wales. No fees are charged for asking the committee to set a market rent for a property.