The Richmond Magazine - June 2010
A change in legislation concerning high value tenancies means that landlords must take care, writes Gerald Fitz-Gibbon, Director of Fitz-Gibbon, Richmond.
It really isn't unusual for homes in areas such as Richmond and its environs to achieve rents beyond £500 a week. Indeed, if it's a spacious family home, there's every chance that the rent will comfortably exceed this figure. Flip through the pages of the glossy magazines and then hit the numerous property portals, and it won't take you too long to find a fair selection of South West London homes where rents break the £1,000 per week mark.
All of which may be pretty obvious to those of us who reside in these leafy suburbs. However, what may not be so apparent is the recent passing of new legislation that will, from October 1, significantly change the tenancy status of high rental value properties and throw many an agent, landlord and tenant into confusion.
Today, pretty much all private tenancies – where the annualised rent sits below £25,000 a year – are created as Assured Shorthold Tenancies (AST's). There are exceptions, such as second homes and resident landlords, but AST's are the most common form of private residential tenancy. Yet when rent exceeds the threshold of £25,000, contractual tenancies are the norm. Most – though certainly not all – letting agents are aware of this.
On March 25, a statutory instrument was laid before Parliament that increased the AAST threshold to £100,000 per annum. This change means that the majority of high value tenancies let to individuals will automatically convert to an AST on October 1. It is a great initiative and one which ultimately simplifies the mechanics of residential tenancies.
There is, however, cause for concern. Technically, from October, the deposits on all these AST's will have to be registered. Current legislation dictates that this must take place within 14 days of the start of the tenancy, with severe landlord penalties for non-compliance. How then will landlords register the deposit without penalty if a tenancy has been in existence for many months?
In addition, the serving of statutory notices to bring to an end one of these new high value AST's may also be cause for concern. Will tenants demand the usual two-month notice period required by Housing Act legislation? When will notices have to be served? And will there be questions as to their validity?
These are real concerns and agent awareness is crucial to the success of new high value residential tenancies. If you are likely to be a landlord of such a rented property after October 1, start asking the questions now and make sure you are comfortable that your agent is well prepared.
Fitz-Gibbon specialises in mid/high value residential letting across West and South-West London, Tel: (020) 8892 8921