An Introduction to Assured Shorthold Tenancy Agreements
An assured shorthold tenancy or AST for short is the most usual type of tenancy agreement used in residential letting today. Since 1997, all new tenancies are automatically assured shorthold tenancies unless otherwise agreed.
But exactly what exactly IS an assured shorthold tenancy? In this post, I’ll look more closely at what it involves and at how you can use this kind of tenancy agreement correctly.
The Basic Principles of an AST
The basic principle behind an AST – and probably why it is called assured – is that it offers some security of tenure to the tenant, subject to some limitations. This means that as long as the tenant pays the rent and abides by the conditions of the tenancy they are entitled to occupy the property for the agreed period – or 'term' as it is known.
That assurance works both ways too. It means that the landlord is entitled to get their property back at the end of term with the tenant having no further rights of occupation.
When Should an AST be Used?
The law sets down when an AST can and cannot be used.
ASTs can only be used by private landlords and housing associations. They can only be used when the landlord doesn’t live in the property and when it is the tenant’s main home.
ASTs can’t be used for business tenancies (nor pubs), for holiday lets nor for lodgers living in your home. Although it rarely applies it’s also useful to know that they can’t be used when rent is under £250 a year (or £1,000 in London) or above £100,000 a year.
Please note: This information is for England and Wales. As with many other aspects of law, there are differences in Scotland. There, tenancies are normally assured or short assured tenancies but there is also a new kind of tenancy agreement – the private residential tenancy – which came into use on the 1st of December 2017.
Terms… When Short can Mean Long
The word ‘shorthold’ is slightly misleading here. ASTs are not necessarily short. The term shorthold is used to distinguish the AST from tenancies that give tenants ongoing rights – see later. New ASTs are mostly granted for fixed terms of 6 or 12 months but according to this legal blog there is actually no minimum term and they can be granted for up to seven years.
When the fixed term period expires the landlord can either grant the tenant another fixed term AST (assuming they wish to) or allow the tenancy to continue on a month-by-month basis. In this case, it becomes a periodic tenancy – see later for more information on this.
The Government has recently consulted on proposals to make the minimum period of an AST three years, although there would be a six-month break clause. If these proposals are adopted there is likely to be new legislation on ASTs.
Setting Up an AST
An AST is a legal contract between the landlord and the tenant. As a result, when creating one, it is important to make sure all the I’s are dotted and all the T’s are crossed. If any errors are made in the wording the AST could be invalid. In extreme cases, this could make it difficult to gain occupation of the property or secure payment of the rent.
An AST should set down all the terms and conditions under which the tenant is entitled to occupy the property. These include, for example, what they may use it for, what they may not do, responsibility for damage and, of course, how much the rent is and when it should be paid.
Assured Shorthold Tenancy Agreement Template
There is no single, official wording for what an AST should include. Different ASTs, used by different landlords, can vary. But rather than trying to create your own it can save time and hassle to use a ready-made template AST from a reliable source.
- The official UK Government site provides a free suggested model agreement for an AST here.
- The National Landlords Association provides templates for ASTs and other tenancy documents to paying members.
- Landlord Zone provides a range of tenancy documents, either free or paid for depending on the type.
Important Points to Consider
As a landlord, when you enter into an agreement with a tenant, there are a number of things you are legally obligated to do and a number of things, while not legally required which are, nonetheless, best practice.
Here we will run through a number of them but please note that this is not an exhaustive list and if you're unsure, we suggest you speak to an expert.
Although there is no legal requirement to do so, it is a good idea to take references when using an AST. This is to ensure that the person who will be named in the AST is who they say they are. It is also an opportunity to check their credit history, employment status and income.
Right to Rent
Right to Rent was introduced on the 1st of February 2016. It means you must carry out a check to ensure that your tenant – and anyone who will use the property as their main home – is legally entitled to be resident in the UK and to rent property here.
All tenants must be checked. It is illegal to carry out the checks only on those who you know or suspect are from abroad or are non-British citizens.
Here, we have an article that explains how Right to Rent checks work.
Tenancy Deposit Protection
Assuming that you are taking a deposit from your tenant it must be protected in a Government-approved tenancy deposit scheme. If it is not it may be difficult to evict the tenant should it be necessary.
This site gives details of tenancy deposit protection schemes which you can use.
Gas Safety Certificates and Energy Performance Certificates (EPCs)
A Gas Safety Certificates and an EPC (Energy Performance Certificate) must be provided to the tenant, by law in all cases. If they aren’t it may be difficult to evict the tenant should it be necessary, even though you will have used an AST.
Although there is no legal requirement to do so, it is sensible to make an inventory of the contents and a report of the condition of a property before it is handed over to a tenant. Indeed, many standard AST documents refer to an inventory in the wording and allow for this to be attached as an appendix.
Terminating the Agreement
An AST becomes periodic when it comes to the end of its fixed term. If you wish to end the AST before the end of this term then there are typically two main procedures used to achieve this. These are commonly known by the relevant section in the Housing Act 1988 which sets down how they, and the relevant notices which must be given to the tenant, work.
Section 21 Notice
The Section 21 procedure for ending a tenancy can be used when a landlord doesn’t require a specific reason to end it. Sometimes it has been called or known as a no-fault eviction. Section 21 is normally used when an AST reaches the end of its term and the landlord doesn’t wish to renew. It is also used to end a periodic tenancy –see later.
There are specific requirements around the usage and timeline of issuing and successfully using a Section 21 Notice including a landlord giving a minimum of two months notice.
Changes to the law - made in October 2018 - now mean that it is now necessary to use an official form to issue a Section 21 Notice of Possession and that key elements are considered and adhered to. This is available, here.
Section 8 Notice
The Section 8 procedure is used when the landlord wants to end the tenancy and has grounds for doing so. These grounds can be varied, although are, typically, around the tenant, having broken a specific term of the AST. Common grounds for use of Section 8 Notice to Quit are that the tenant is in arrears with their rent (a minimum of eight weeks, typically), has damaged the property or is engaged in anti-social behaviour/being a nuisance to neighbours.
The official Government site provides a sample form you can use here – see Form 3.
Tenants can challenge the use of these notices in court. They can give reasons why they should not be evicted, which can include irregularities in the AST or other documentation. The landlord can only evict the tenant if the court grants an order.
As a landlord, you are quite likely to be involved with periodic tenancies at some stage. A periodic tenancy is one which runs, normally, from month-to-month – or whatever frequency the rent is paid at – rather than being for a fixed term.
When an AST reaches the end of its term, rather than being renewed for another fixed term of, say, 6 or 12 months, assuming no notice has been given by either party, the tenancy will continue as a periodic tenancy, usually by the mutual agreement of both parties.
This legal blog looks at what periodic tenancies are, and whether they are a good idea.
Other Types of Tenancy
Lastly, it is worth bearing in mind that, as an investor and landlord, you may encounter other kinds of tenancy agreement – although these are all much less common than the AST. These include:
These were used before 1989 and give tenants long-term tenancy rights subject to a fair rent. These are generally much lower than market rents and can only be increased according to a pre-determined formula.
These were used between 1989-1997 and were the forerunner of ASTs. They give tenants long-term residence rights but the rent is not regulated.