Property Landlord Advice: Rent limit for AST Agreements increased to £100,000

By Mike Edwards

From 1^st October 2010 all tenancies where there is no legally stated reason why they cannot be ASTs  will be so deemed unless the annualised aggregate rent is in excess of £100,000 or basically £8,333 a month no matter how short the initial term might be.

The Change in Law

So if a tenant rents at £10K a month for 6 months it still cannot be an AST because annualised the rent would be £120K. The term stated in the agreement makes no difference just multiply the rent by 12 and if the result exceeds £100K then from the 1^st of October it can no longer be an AST. Do not make the mistake of thinking the tenant actually has to pay £100,000 or more in a year, they do not. The same rules that applied when the limit was £25,000 now simply apply at £100,000 instead. In effect the figure for a tenancy to fall within the EXCLUDED CATEGORY and be incapable of being an AST has now been increased to £100,000

The Affect

This will mainly affect the London market (over £1924.00per week) or very high rental value properties elsewhere but it applies to all new tenancies granted from 1^st October onwards and also to all tenancies granted on 6th April 2007 or later as and when they are formally renewed.

The problem

The issue here for Landlords and agents is because these previous non ASTs now become ASTs do existing deposits now need to be registered and protected for these higher value tenancies. However the provision that applied when deposit protection first came in that periodic tenancies were unaffected is thought not to apply. Unfortunately the Government Department responsible for the TDP provisions (Communities and Local Government) omitted the word “new” at a critical point when drafting these revised Regulations.

The result

In doing so they condemned all existing cases to potential uncertainty which can only be clarified by a test Court case. So the advice from CLG, ARLA and the TDP schemes is to register ALL deposits where, under the revised limit if an existing tenancy was actually a new one being granted now it would be covered by the new rules. A Prescribed Information Form must also be issued and interestingly so must any clauses that would be in any such new tenancy but were not of course in the original agreement.