With all the jargon and acronyms that exist in the language of property letting, it’s common to encounter something you may not be 100% sure about.
One acronym that crops up is ‘AST’. This brief guide will explain what they are, why we have them, what they do, and how they protect landlords and tenants.
What is an Assured Shorthold Tenancy (AST)?
An AST is a form of assured tenancy that allows the landlord to let the property whilst retaining the right to repossess the property at the end of the term. It is different from regulated and assured tenancies, where the tenant may be entitled to remain in the property at the end of the term.
Importantly, a residential tenancy created on or after 28th February 1997 will automatically be an AST unless the landlord has served a notice to the tenant specifically stating that the tenancy is not an AST.
There is no minimum fixed term for an AST, but any order for re-possession by the landlord can’t take effect if it’s earlier than six months after the beginning of the original tenancy.
Similarly, there is no legal limit on the maximum length of term that can be granted by an AST.
When do we use ASTs?
It’s important to know that ASTs are only used when all the below requisites are applied:
- the property you rent is private
- the tenancy started on or after 15th January 1989
- the property is the tenant’s main accommodation
- the landlord doesn’t live in the property
Crucially, a tenancy will not be classed as an AST should any of the below occur:
- it began or was agreed before 15th January 1989
- the rent is more than £100,000 a year
- the rent is less than £250 a year (less than £1,000 in London)
- it’s a business tenancy or tenancy of licensed premises
- the property is a holiday let
- your landlord is a local council
To clarify the meaning of some of the above requisites where an AST cannot be used, licensed premises refers to public houses, and a holiday let is categorised as a cottage, home, or property used for holiday vacations when for fewer than 30 days.
Why do we need ASTs?
The function of the AST is to protect both parties involved in the agreement. It’s important to consider the well-being of both the landlord letting the property as well as the tenant renting the property. The AST acts as a type of contractual middle-ground to establish a safe-guard for both.
Firstly, if the tenant continues to pay the rent on time and looks after the property as the contract stipulates, then they are legally entitled to occupy the property for the length of the term.
In addition, the landlord isn’t allowed to increase the rent during the fixed term of six or twenty-four months unless the tenant specifically agrees to it, or the signed contract contains a rent review clause.
A rent review clause will typically clarify:
- when an increase can happen
- how much notice the tenant will receive
- a method for calculating the new rental amount
On the other hand, the landlord needs legal protection too. With an AST, the landlord can legally repossess the rental property at the end of the fixed term as the tenant officially gives up all rights of occupation.
What’s a periodic AST?
Periodic ASTs are best described as a rolling weekly or monthly contract agreed between the landlord and the tenant to allow the tenant to continue to reside in the property.
The landlord is obliged to provide the relevant information to the tenant in writing if no periodic AST contract is officially drawn up:
- the periodic AST start date
- the rental amount and dates for payment
- any rent-review clause
- the periodic AST end date
What to include when setting up your AST
If we were to say that drawing up the AST correctly is crucial, it could be something of an understatement. As it is the official legal contract between the landlord and the tenant which defines all the specifics of the whole tenancy agreement, there’s no scope for making any errors or leaving ambiguities.
The AST can even be deemed invalid in a court of law if the wording is not clear to all parties involved. In the worst-case scenario for the landlord, it could make it difficult to regain occupation of the property if needs be. It’s definitely in everyone’s interest to make sure it’s correctly drawn up.
Some of the most important things that an AST should include are;
- the names of all the people involved
- the rental price and how it’s paid
- information on how and when the rent will be reviewed
- the deposit amount and how it will be protected
- details of when the deposit can be fully or partly withheld (for example, to repair damage the tenant may have caused)
- the full address of the property
- the start and end date of the tenancy
- any tenant or landlord obligations
- an outline of bills for which you / they’re responsible
- whether the tenancy can be ended early and how this can be done
- who’s responsible for minor repairs (other than those that the landlord is legally responsible for)
- whether the property can be sublet or have lodgers
Amending and modifying an AST
Once it’s finalised, the processes of amending or modifying an AST are complicated. Importantly, if any changes are proposed, both parties must agree.
When the amendments are decided, they should be recorded in writing either by drawing up a completely new AST or by making official modifications to the existing agreement, where they’ll need to be signed and dated by both parties.
It may be a good idea to get a witness to oversee the changes being signed as this will remove any possibility of doubt about the legitimacy of the modifications at a later date.
Additional clauses and addendums
As a landlord, it’s perfectly reasonable to want to add additional clauses into the AST if the standard ones don’t fully cover how you want to manage your property. After all, it’s your asset and you’re entitled to protect it however you see fit.
For example, some landlords add clauses about how it’s a requisite for the tenant to regularly maintain the garden, whilst others may specify that smoking in the residence is strictly forbidden.
However, one typically contentious addendum refers to whether pets are allowed in the property or not.
Clearly, some tenants will require the use of a guide dog in the house, but a term in the tenancy may say that no pets are allowed.
As blind people or tenants with limited vision should obviously not be discriminated against, the landlord is obliged to change the terms in order to allow guide dogs in the property, unless they have a very strong reason not to. This could be if another tenant in the property has a serious allergy to dogs, for example.
If you do wish to negotiate additional clauses into the AST regarding pets, it always pays to be open and honest.
Bringing the tenancy to a close
At the end of the fixed term, it’s up to the landlord and the tenant to discuss whether they wish to extend the tenancy or alternatively, bring it to a close.
If both parties agree to extend the tenancy, a new AST can be drawn up to start the new term. This is a good time to refresh the professional relationship between the landlord and tenant and the new AST could possibly include some amendments that both parties deem appropriate.
Alternatively, should the tenant leave, the contract will officially expire on the date established in the original AST.
However, under some circumstances, a landlord may wish to bring the AST to a close before the date specified on the original contract. This brings us to section notices.
Official section notices
Landlords can evict tenants who have an AST either using a Section 21, a Section 8 – or both.
A Section 21 can be used to evict the tenant when a landlord simply doesn’t wish to renew the contract. As long as there’s a written contract, the Section 21 can be enforced.
However, landlords must always give the tenants at least two months’ notice to leave the property and you cannot use a Section 21 notice if any of the following apply;
- it’s less than 6 months since the tenancy started, or the fixed term has not ended, unless there’s a clause in the contract which allows you to do this
- the property is categorised as a house in multiple occupation (HMO) and does not have an HMO licence from the council
- the tenancy started after April 2007 and you have not put the tenant’s deposit in a deposit protection scheme
- the council has served an improvement notice on the property in the last 6 months
- the council has served a notice in the last 6 months that says it will do emergency works on the property
In addition, you are also not able to issue a Section 21 if you have not given the tenant(s) a copy of the property’s Energy Performance Certificate, a current gas safety certificate, or a copy of the government’s ‘How to rent’ guide.
The Section 8 procedure is used when the landlord wants to end the tenancy because the tenant has broken a specific contractual agreement established in the AST.
This may include the tenant being at least two months in arrears with their rent, having damaged the property in a negligent manner, or engaging in anti-social behaviour against the neighbours.
To give your tenants notice using a Section 8, all landlords must fill in a ‘Notice seeking possession of a property let on an assured tenancy or an assured agricultural occupancy’. You are obliged to specify on the notice which terms of the tenancy the tenant has broken.
Landlords can give between two weeks’ and two months’ notice depending on which terms the tenant has broken and you are empowered to then apply to the court for a possession order if your tenants do not leave by the specified date.
Letting Stirling Ackroyd manage your AST
From this guide, you can see that ASTs are fundamentally important to set up correctly, and crucial for protecting both the landlord and the tenant in the complex industry of letting and renting properties in the UK.
Adhering to all the compliance rules and regulations is time-consuming and can be stressful as the penalties for not doing so are severe.
By letting seasoned property experts like Stirling Ackroyd help draw up and then manage your AST, you’re taking a huge weight of responsibility from your shoulders.
Stirling Ackroyd’s staff are all fully-qualified experts in the technicalities and legalities of ASTs which can seem confusing to inexperienced landlords as well as tenants who rarely wish to get involved in this complicated bureaucracy.
Get in contact with any one of our branches across Central and East London so a team-member can start helping you with any problems you may have.
With more than three decades’ experience in letting and assisting people to rent property all over Central and East London, Stirling Ackroyd is the perfect fit for you.