Keywee - Landlord and Tenant Law Research Site » Assured & Assured Shorthold

Does Rent Increase Create new Tenancy?

guildy — Mon, 31 Oct 2011 11:45:13 +0000

As a rule of thumb, any term of a tenancy can be varied by agreement with the tenant including a term of the rent. The mere fact that there is a procedure for increasing the rent of an assured shorthold tenancy under section 13 Housing Act 1988 does not mean that the landlord must follow that procedure where the variation in the rent is agreed by both landlord and tenant [s.13(5) Housing Act 1988].

(5) Nothing in this section (or in section 14 below) affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy (including a term relating to rent).

There are certain variations that will operate as a surrender and re-grant of a tenancy which include:

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Where the extent of the demise is increased [Well Barn Farming v Backhouse [2005] 3 E.G.L.R. 109]
Where the length of the term is increased [ibid]
The substitution of one suite of rooms for another operates as a surrender and re-grant. [Giles v Spencer (1857) 3 C.B.N.S. 244]

However, terms that do not operate as a surrender and re-grant but instead are a simple continuation of the existing tenancy include:

A mere increase in rent does not operate as a surrender and re-grant [Doe d. Monk v Geekie (1844) 5 Q.B. 841; Jenkin R. Lewis v Kerman [1971] Ch. 477; Friends Provident Life Office v British Railways Board [1996] 1 All E.R. 336]

I would hold … In the absence of an increase in the extent of the premises demised or of the term for which they are to be held, both of which would change the legal estate, I can see no reason why the lessor and assignee could not achieve the changes they desired in the terms of the lease without the law implying its surrender and a re-grant for the remainder of the term of the lease. [Beldam L.J. Friends Provident Life Office v British Railways Board [1996] 1 All E.R. 336]

A reduction in rent is no surrender [Crowley v Vitty (1852) 7 Exch. 319; Buttery v Pickard (1946) 174 L.T. 144.][/amember_protect]

Wales AST Threshold Increase

guildy — Sun, 21 Aug 2011 11:57:23 +0000

From 1 December 2011, the annual rent threshold for when a tenancy is an assured shorthold tenancy is increased from £25,000 to £100,000. To see the effects this may have to any existing tenancies, please see our slightly modified article that we did when the change came in for England on 1 October 2010.

Letting to Minors

guildy — Sun, 06 Feb 2011 17:44:37 +0000

It is not possible for a minor (a person under the age of 18) to hold an estate in land [s.1(6) Law of Property Act 1925].

By virtue of paragraph 1(1) of Schedule 1 to the Trusts of Land and Appointment of Trustees Act 1996 any purported grant of a legal estate to a minor will not be effective to pass the legal estate, but will operate as a declaration that the premises are held in trust for the minor.

This essentially means if a landlord grants a tenancy to a minor, then any purported tenancy is held in trust by the landlord for [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']the occupier who becomes the beneficiary to the trust. In order to end the occupation, the landlord must first end the trust which can be very complex.

The Court of Appeal had to consider how a tenancy given to a minor could be ended. In Hammersmith and Fulham London Borough Council v Alexander-David [2009] EWCA Civ 259, The claimant aged 16 applied to the local authority for accommodation under the Housing Act 1996 because she was homeless. The council discharged its duty and entered an agreement on its standard form for adults, where the parties were referred to as landlord and tenant, which gave her a tenancy of the premises.

It was held that a landlord with full capacity to grant a legal tenancy and who granted a tenancy without any express qualification to the effect that something less than a legal tenancy was being granted could not subsequently say that what he had granted was not a legal tenancy but an equitable tenancy. Paragraph 1(1) of Schedule 1 to the Trusts of Land and Appointment of Trustees Act 1996 therefore applied to the tenancy granted to the claimant.

For so long as the council held the premises in trust under that Act for the claimant it could not lawfully destroy the subject matter of the trust by serving notice to quit on her.

See here for the Times report on this case.

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The Dispute Service changes

guildy — Fri, 17 Sep 2010 16:01:26 +0000

This article is only relevant to you if you are a member of the tenancy deposit scheme operated by the Dispute Service Ltd.

Essentially the changes to the scheme rules and tenancy requirements apply from 1 October 2010 when the threshold increases to £100,000 for when a tenancy is an assured shorthold tenancy. As has been previously discussed, any tenancies currently excluded from being an assured shorthold tenancy because their rent is in excess of £25k will become an AST on this date if the rent is below the new threshold.

The changes affect all those tenancies that become an AST (England only) from this date and there are also significant changes for non assured shorthold tenancies after 1 October 2010 (for example if they are a company let, resident landlord etc.)

The members terms of business must be amended in all cases but this article concentrates on the requirements relating to tenancies.

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Tenancies that become AST's on 1 October 2010 because of the threshold increase

For these tenancies, the member of TDS two options:

It is widely accepted that on the balance of probabilities, deposits taken at a time when the tenancy was not an AST will not require protection after they become AST. However, in order to play it safe it is also accepted that protecting the deposit within 14 days of 1 October is a sensible option that covers all bases.

Option 1: If the member of TDS decides to risk it and NOT protect the deposit, then, as long as no renewal of the tenancy is done, the member needs do nothing because the member is not asking the dispute service to protect the deposit or carry out any adjudication should there be a dispute.

Option 2: If the member wishes to protect the deposit with the TDS, then the member must register the deposit “no later than 1st October 2010″ and either grant a new tenancy which contains the appropriate “G-Clauses” or, issue an addendum which contains the “G-Clauses”. In addition, the prescribed information relating to the tenancy deposit as provided by the scheme must be issued.

New assured shorthold tenancies after 1 October 2010

All new assured shorthold tenancies after 1 October will require the deposit protecting as normal. The AST used by the member must incorporate the “G-Clauses” and must be accompanied by the prescribed information in relation to the tenancy deposit.

Non-assured shorthold tenancies after 1 October 2010

For tenancies after 1 October 2010 which cannot be an AST for example company lets or resident landlord tenancies, the Tenancy Deposit Scheme for Regulated Agents (TDSRA) will no longer be available although all existing tenancies prior to this date will be unaffected.

However, all “new” non-assured shorthold tenancies must “not” be registered on the tenancy database as they can no longer be protected by the TDS.

However, the dispute service will “consider” disputes if the following is satisfied:

The ICE will propose what he considers the most effective method of resolving the dispute;
The tenancy agreement must contain the relevant clauses contained in TDS G relating to non-ASTs
Landlord, tenant and agent must consent in writing to his proposal;
Disputes will be subject to a fee of £500 + VAT, or 10% of the deposit + VAT, whichever is the greater;
The resolution process will not start until the parties’ consent, the disputed amount and the fee have been received.

The fee is confusing because neither the documentation nor the “G-Clauses” stipulate who should pay the fee and whether it is recoverable from one party or the other depending on success of the resolution.

There is another confusion in the documention:

Paragraph 26 of document TDS-D4 states:

We have taken this opportunity to revise the Prescribed Information and Clauses for inclusion in tenancy agreements relating to the operation of TDS, set out in TDS G and attached to this document (Appendix 1 Sections A and B). These changes only affect tenancies that will continue to be non-ASTs beyond 1st October 2010.

Yet, paragraph 28 states:

The new documentation must be used for all new non-ASTs starting on/after 1st October 2010.

So, which is it? Does the new documentation apply to only “new” non-AST’s on/after 1 October or does it apply to non-AST’s that “continue beyond” 1 October 2010?

I can only assume paragraph 26 is a mis-print because elsewhere the requirement for non-AST’s only refer to new, renewed or extended tenancies on or after 1 October 2010.

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Deposit Protection after 1 October

guildy — Fri, 10 Sep 2010 09:47:19 +0000

The DCLG were insisting that all deposits required protecting within 14 days of 1 October 2010 for tenancies that convert to assured shorthold tenancies after the rent threshold increase. However it is being widely reported that they have revised their position after several commentators including this website said it wasn’t necessary. They now say:

We do not consider that deposits taken before 1 October will need to be protected as these were not taken in connection with a shorthold tenancy and therefore do not meet the criteria for protection specified in the Housing Act 2004.

However, agents and landlords should be aware that this is a matter for the Courts to decide and it would be wise to protect deposits on 1 October and certainly on any renewal of the tenancy.

Our guidance on the AST threshold increase is here

Leases in Writing

guildy — Tue, 03 Aug 2010 09:43:27 +0000

Except for a tenancy taking effect in possession with a term not exceeding 3 years [s.2(5)(a) Law of Property (Miscellaneous Provisions) Act 1989], a contract for the disposition of an interest in land (which includes tenancy agreements) can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each [s.2 Law of Property (Miscellaneous Provisions) Act 1989].

EPC and Inventory

guildy — Thu, 27 May 2010 15:49:42 +0000

Energy Performance Certificate

Before you begin marketing the property, you must have an Energy Performance Certificate (EPC). This will be given to “prospective tenants” normally when you are viewing the property. Once you have placed a firm order for an EPC, you may market the property whilst the EPC arrives.

Further information on EPCs is available via this article

Members of the Guild of Residential Landlords can obtain an EPC at a discounted rate by clicking here

Inventory

In addition, [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']whilst the property is empty (or about to be empty) you could take this opportunity to create an inventory. If you are taking a high value deposit, it may be worth considering a specialist inventory clerk who will both perform a check in inventory (when the tenants move in) and a check out inventrory (comparing the property when they move out). This provides independant proof of the condition of the property before and after the tenancy.

Alternatively, you can produce your own inventory, this can include photographs of the property and video.

Members of the Guild may download an inventory template (£12.00)

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Within 14 Days after Signing

guildy — Thu, 27 May 2010 15:05:36 +0000

Within 14 days of commencement of tenancy:

If deposit has been taken, register the deposit with the chosen scheme (see this series)

Write to [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']local authority council tax department, electricity, gas and water authority with names of tenants, commencement date and readings as appropriate.

In particular, although not law at the time of writing this post, soon it will be a legal requirement to notify the water authority. A failure to do so will result in the landlord being jointly liable to pay the tenants water charges. See this article for details.

If someone other than the tenant paid the deposit on their behalf and the custodial scheme is used, landlord must issue a deposit confirmation certificate to the person (known as a relevant person) [F033].

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Granting the Tenancy

guildy — Thu, 27 May 2010 14:45:13 +0000

With all tenants and guarantor present, do the following:

[amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']Guarantor should sign all copies of the guarantee agreement located on the back of the Guild tenancy first and this MUST be witnessed.

All tenants to sign both copies of the tenancy agreement and management regulations (if any). These may be witnessed.

If a deposit is taken, all tenants to sign both copies of the section 213 notice (deposit information certificate). If someone else paid the deposit on behalf of the tenant (know as a “relevant person”) for example the guarantor may have paid the deposit, they must also sign the section 213 notice.

All tenants to sign both copies of the inventory.

Landlord to sign all documents.

Tenants given one copy, landlord must retain one copy of all documents.

Collect the rent for the first period.

Complete two copies of the rent card [F012]. One copy for tenant and one for landlord

Tenant to complete standing order form [F034] (if rent payable this way). Landlord should personally send the completed form to the tenants bank (so you know its done).

Issue keys to tenants.

Note down all meter readings.

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Completing the Tenancy Agreement

guildy — Thu, 27 May 2010 14:23:30 +0000

Assuming all checks OK, arrange to meet all tenants and guarantor at one time on the day the tenancy is intended to commence. (This is not always possible in particular with students but does make it much easier).

Complete the tenancy as shown below but leave out the commencement date and date of agreement if you are not meeting all persons on the same day. These should only be completed when all persons have signed.

We recommend a 3 month fixed term tenancy.

Pay particular attention to the start and end dates. Where the rent is to be paid [amember_protect levels='keywee' user_action='error' user_error='amember_error_default_user' visitor_action='error' visitor_error='amember_error_default_guest']on the same date each month as the commencement, the end date should always be the day before. For example, tenancy commences on 14 March and rent payable on 14th, the end date should be 13 June.

If however, the rent is payable on a different date for example the 1st of the month, the end date should always be the day before the rent is due. So, for example, tenancy commences 14 March, rent payable on the 1st of every month, first FULL rent would be payable on 1 April and end date would be 30 June.

Examples

Option 1 where rent payable on same day as commencement each month. Pay particular attention to start and end dates

Option 2 where rent payable on DIFFERENT day to commencement. Pay particular attention to start and end dates

Always make the rent payable calendar monthly if possible even if the tenant is to receive Local Housing Allowance. If the tenant is to receive local housing allowance, you may wish to consider making the rent two calendar monthly instead. See this article for detailed information on creating a tenancy where rent is payable two calendar months in advance as it differs to what’s shown on this guidance.

If a deposit is taken, the Guild agreements come with a section 213 notice which provides the prescribed information relating to the deposit. This is a legal requirement and must be fully completed.

If you wish to add your own clauses that are not contained in the tenancy agreement, these should not be placed into the tenancy agreement itself. You should download the management regulations [F033] and add the appropriate clauses. (You should check with us before adding clauses as the tenancy agreement should contain everything needed)

Two copies of everything will be required (one for the landlord and one for the tenants)

Prepare a detailed inventory, especially if a deposit is to be taken.

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