The Housing Act Rent Threshold Increase

25 03 2010

You may or may not know this, but the rent threshold for the housing act will be increased in October this year. (Please note that this legislative change does not apply in Scotland or Northern Ireland)

It is not 100% clear how this is going to be instated yet, or how it will affect existing contracts, but here is what we understand about it at present.

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The Government have announced that the Rent Threshold Limit will be raised to £100,000 per annum as from 1st October 2010. What this means is that the tenancy agreement used for any rent below a monthly figure of £8333.33 will be the assured shorthold (AST). By introducing this measure the government envisage that more tenants will have their rights strengthened and protected by legislation. Any rent over £100,000 will be subject to the normal contractual tenancy practices.

For reasons not fully explained by the Government the rise will apply retrospectively but the full legislation has not been published so this phrase may be misleading. What is likely to happen is that existing contractual tenancies up to £100,000 per annum will become ASTs from the date of the legal change.

There are 2 main consequences arising from this legislation – the deposit and notices.

1. The deposit

Tenancies that fall into the Act from changeover date are likely to need their deposits protected immediately and the necessary prescribed information issued.

Commentators are divided on possible problems arising from this as it could be argued that all tenancies falling into the tenancy deposit regime after 1st October 2010 will automatically be in breach of the requirements to protect deposits as they will have had their deposits placed into protection more than 14 days after they were received. However, we did not have to protect existing deposits when TDS legislation first came in but it was required for renewals and it is uncertain how the law will adjudicate on this matter. Certainly courts have given short shrift to the argument that ASTs existing prior to the introduction should have had their deposits protected at that stage.

Potentially, the various tenancy deposit protection schemes will face a sudden rise in the number of tenancies being registered with them and, presumably, in the number of disputes they have to resolve. Those disputes will, naturally, be for greater sums of money and will inevitably be more complex. This may prove hard for schemes to deal with under their current financial and business constraints.

2. Notices

The procedure for evicting tenants will be the procedure laid out in the Housing Act 1988, so you will need to serve a section 21 or section 8 notice rather than a notice to quit.

However there may be a problem with tenancies which are due to end less than two months after 1st October 2010.

Agents/Landlords will not be able to serve valid section 21 notices giving the statutory minimum two months notice to end the tenancy after the date to bring such tenancies to an end at the end of their fixed terms. It is not clear if a notice served before changeover would be valid for the purposes of section 21 and it could only be so if the deposit had already been protected prior to service.

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Sorry this is not the most interesting post, but I thought it was worth mentioning, as this may be an important change for some landlords. In my next post I’m going to do some Q and A on some common legal questions that we get asked, this should be pretty helpful for a lot of people.

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