Government consultation on a compulsory 3 year Assured Shorthold Tenancy

Government consultation on a compulsory 3 year Assured Shorthold Tenancy

At the beginning of July 2018, the Government issued a consultation document which seeks a view on a proposal that new residential tenancies in England should be for a minimum of three years.

The current law is that assured shorthold tenancies (ASTs) grant tenants a minimum of six months security of tenure. Most tenancies are granted for either six months or a year but can also be agreed for a longer period of time. Once the contractual tenancy comes to an end, the tenancy continues from month to month or week to week, depending on when rent is paid. A landlord can bring the tenancy to an end by serving a section 21 notice with as little as two months’ notice and the landlord does not need to show any fault on part of the tenant to bring the contract to an end.                                                                                                                                       

The Government is reviewing the length of ASTs because they believe that longer tenancies would be more beneficial for both tenants and landlords. 

Is the change supported?

Many letting industry professionals suggest that moving to a three year fixed term contracts with a break clauses at six months will make it harder for landlord’s to evict problem tenants, for example those who do not pay rent or damage property, making some investors reconsider whether it is viable to continue to let our their property.

There have also been objections from the National Landlords Association (NLA), which represents over 40,000 landlords in the UK. NLA carried out research with tenants and found that more than 50% consistently say that they are happy with the current ASTs tenancy length and 20% said that if they asked for a longer period then they got it.

In addition, there is a question over mortgage lenders rules which usually specify short-term tenancies of six or twelve months. This would mean that lenders would need to change their rules.

What are the benefits of the change?

Short term contracts mean that tenants face instability, a lack of power and the potential cost of unplanned and unwanted moves.  On the other hand, long term tenancies would save time and money spent on unnecessary renewals and provide greater security and assurance that they will be able to remain in their home for longer. In addition, landlords will be reassured that there will be a continued income stream from tenants.

New Framework

As a result, the Government is consulting on its proposed model for a minimum three-year residential tenancy with a six-month break clause, and the options for implementing this.

The proposals:

  • A three-year term with an opportunity for either landlord or tenant to leave the agreement after the initial six months.
  • Following the six-month break clause, the tenant would be able to end the tenancy by providing a minimum of two months' notice in writing.
  • Landlords would be able to recover their property during the fixed term if they had reasonable grounds.
  • The tenancy would allow a rent review no more than once a year.
  • There would be some exemptions for shorter lets, such as student accommodation, holiday lets, tenancies granted to people with a limited right to remain in the UK and possibly other circumstances.

The consultation continues for eight weeks which runs until 26 August 2018.