There are many different types of tenancy in the UK, the most common of which is an Assured Shorthold Tenancy (AST), this is where there is a fixed term for the contract during which you are allowed to live in the property with no rent increases assured. This fixed period is typically either 6 months or a year. ASTs came into effect in 1989 and pretty much all tenancies after that date were assured shorthold tenancies. Before that time though, regulated tenancies were the norm and there are still people who live in rented accommodation under a regulated tenancy. It is important for any investor who buys a property with a sitting tenant to understand what type of tenancy the tenant has as some of them could well be regulated. In this guide we will take a look at regulated tenancies and highlight some of the key aspects of them.
Regulated tenancies are likely to be ones that started between the introduction of the Rent Act 1977 and the introduction of assured shorthold tenancies in 1989.
Fair Rent
It weas typical for Regulated Tenancies that the Tenancy is registered with the Valuation Office Agency under the fair rent system. Either the landlord or the tenant could get the rent registered. A tenant can have the rent re-registered every 2 years and a landlord can ask for it to be re-registered after 21 months of the previous registration. By registering the rent, the landlord or the tenant are essentially asking for the rent to be reviewed and a fair rent set for the property. To register a rent either the tenant or the landlord needs to fill out the relevant rent registration form. Based on the information set out in the registration form, the rent officer, who is independent of local councils and Government will set a new fair rent using the maximum fair rent calculation which is the maximum to which the new rent can be set. In essence this is the current rent plus the percentage change in RPI since the last time the rent was registered plus either 7.5% or 5% depending on whether the review is for the first time since January 1999 or subsequent times. This value is then rounded up to the nearest 50p. It has to be noted that the rent officer can determine a rent which is lower than the maximum allowable rent based on the condition of the property, the personal circumstances of the tenant or the provision of furniture. The landlord cannot legally charge the tenant more than the fair rent set by the rent officer and, in most circumstances the fair rent will be less than the normal market rent charged for a similar property under an AST.
Not all rents will have been registered and unless the initial tenancy contract allows for rent increases, in which the landlord must follow the terms of the contract, there are only three ways to increase the rent:
- Landlord and tenant come to a formal agreement
- The rent is registered
- The landlord serves the tenant with a formal notice of increase form
Evictions
To evict a tenant living in a property under a regulated tenancy agreement a landlord must gain a court order no matter what the circumstances of the eviction. It is a criminal offence to evict someone from a regulated tenancy without a court order. Evictions can only be applied on 19 grounds (Ground 7 is no longer valid), of which 10 are discretionary meaning the court may or may not decide to grant the application and 9 are mandatory meaning the court must grant the application.
Discretionary Grounds
- Ground 1 the tenant has not paid the rent, or has broken some other term of the tenancy
- Ground 2: the tenant has caused a nuisance or annoyance to neighbours, or has been convicted of immoral or illegal use of the premises
- Ground 3: the tenant has damaged the property or allowed it to become damaged
- Ground 4: the tenant has damaged the furniture
- Ground 5: the landlord has arranged to sell or let the property because the tenant gave notice that he or she was giving up the tenancy
- Ground 6: the tenant has assigned or sublet the whole of the property without the landlord’s consent
- Ground 7: No longer exists
- Ground 8: the tenant was an employee of the landlord and the landlord requires the property for a new employee
- Ground 9: the landlord needs the property for himself or herself or certain members of his or her family to live in and that greater hardship would not be caused by granting the order than by refusing to grant it – but this does not normally apply if the tenant was a sitting tenant when the landlord bought the property
- Ground 10: the tenant has charged a subtenant more than the Rent Act permits.
Mandatory Grounds
- Ground 11: the landlord let his or her home with the intention of returning to live there again
- Ground 12: the landlord let accommodation to which he or she intends to retire
- Ground 13: the accommodation was let for a fixed term of eight months or less, having been let for a holiday at some time during the previous 12 months
- Ground 14: the accommodation was let for a fixed term of a year or less, having been let to students by a specified educational institution or body at some time during the previous 12 months
- Ground 15: the accommodation was intended for a member of the clergy and has been let temporarily to an ordinary tenant
- Ground 16: the accommodation was occupied by a farmworker and has been let temporarily to an ordinary tenant
- Ground 17: when some agricultural holdings were amalgamated, accommodation previously occupied by a farm manager has been let temporarily to an ordinary tenant
- Ground 18: the accommodation was previously occupied by a farm manager, widow or widower and has been let temporarily to an ordinary tenant
- Ground 19: the property was let on a protected shorthold tenancy and the shorthold term has ended
- Ground 20: the landlord was a member of the regular armed forces at the time the letting was made and intended to live in the house at some future date.
Right of Succession
One of the least known things about regulated tenancies is the right of succession. If the main tenant passes away then their spouse or someone living with them as husband or wife automatically takes on the right to become a Rent Act Statutory Tenant who will have the same protections as their spouse had under the regulated tenancy. It doesn’t end there. If there is no spouse then any family member who was living with the tenant for at least two years before their passing will be allowed to stay in the property under an assured tenancy. There is a second right to succession and if a member of the original tenant’s family is living with the first successor for at least 2 years before that person’s passing then the family member has the right to an assured tenancy upon the passing of the first successor. Note that there are greater rights under an Assured Tenancy than under an Assured Shorthold Tenancy. Under an Assured Tenancy, however, the landlord can cancel any registered rent and charge proper market rent.
Regulated Tenancies are rare these days, but they do exist and any investor looking to buy a rental property with an existing tenant should check carefully to see what type of tenancy they have. Long standing tenants could well have a regulated tenancy which give them very strong tenant rights in the property.
