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RENEWING A TENANCY |
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> Advice to landlords about renewing tenancy |
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Renewing a Tenancy : Shorthold Tenancy - End of a
Fixed Term
1) The landlord agrees a replacement tenancy:
This will automatically be on shorthold terms unless he agrees
to set up a replacement tenancy on an assured basis.
If it is granted on a fixed term basis then the
landlord will only be able to gain possession during the fixed term on one of
the following grounds:
2,8,10 to 15, 17.
Advantages of a fixed term renewal are:
· New terms including provision for a rent increase
can be negotiated and included in the agreement
· Both parties are certain that the tenancy will
continue for the specified period
However, the landlord will not be able to gain possession of
the property for at least six months after the start of the new agreement.
If both the landlord and the tenant agree just to carry on the
tenancy from one rent period to the next then a contractual periodic tenancy is created. The landlord will be able to gain possession at any time provided
that he has given the tenant two months notice (under section 21 of the Housing
Act 1988) that he requires possession. Periodic tenancies are also useful where
a tenant has asked to stay on for a short but undefined period.
2) The landlord does nothing
The tenancy will automatically run on from one rent period to
the next on the same terms as the preceding fixed term shorthold tenancy
creating a statutory periodic tenancy. The tenancy will continue on this
basis until the tenant leaves, the landlord replaces the tenancy or requires
possession of the property.
Renewing a Tenancy : Assured Tenancy - End of a Fixed Term
1) The landlord agrees a replacement tenancy
Any replacement tenancy agreed between the landlord and tenant
can only be on assured terms unless the tenant agrees that the landlord can
replace it with a shorthold tenancy. Under the Housing Act 1996, any assured
tenancy started on or after 28 February 1997 will automatically be replaced on
an assured basis whatever the tenancy agreement says, unless the tenant gives
the landlord notice that he wants a replacement tenancy on shorthold terms.
The replacement tenancy can either be for a fixed term or it can be
agreed that the tenancy continues from one rent period to the next, called a contractual periodic tenancy.
If a new fixed term tenancy is agreed, the landlord
will only be able to gain possession of the property during the fixed term on
one of the following grounds: 2.8.10 to 15, 17
Possession can be applied for under any of the grounds at the
end of the fixed term but a landlord does not have an automatic right to regain
possession of an assured tenancy at the end of a fixed term.
If the replacement tenancy is agreed by both landlord and
tenant to run on a periodic basis (i.e. from one rent period to the next) it is
called a contractual periodic tenancy. Unless agreed otherwise the
tenancy will continue on exactly the same basis as before. It is good practice
for the landlord to write to the tenant to confirm what has been agreed.
2) The landlord does nothing
The tenancy will automatically run on from one rent period
to the next under the same terms. This is called a statutory periodic tenancy.
It will continue to run on this basis until the tenant leaves the property.
Rent Increases
Should these be established in the Tenancy Agreement?
A tenancy agreement should detail the rent to be charged and
the arrangements for paying it.
If the tenancy is for a fixed term, the agreement should state
whether the rent will be fixed for the length of that term, or whether it will
be reviewed at regular intervals, and how this will be done.
For a contractual periodic tenancy, again the tenancy
agreement should detail how often the rent will be reviewed and the procedure
for doing so.
Rent increases are not dealt with in the tenancy
agreement
For fixed term tenancies, rent can only be increased by a
landlord with the consent of the tenant.
When the fixed term ends and the tenancy lapses into a statutory periodic tenancy, the landlord can increase the rent with the
agreement of the tenant. Alternatively, under the Housing Act (1988), he can
propose a rent increase to be payable as soon as the statutory tenancy begins. A
landlord can then propose further increases at yearly intervals after the first
increase.
For a contractual periodic tenancy under the Housing
Act (1988) a landlord can propose a rent increase on a special form titled Landlord's notice proposing a new rent under an Assured Periodic Tenancy or
Agricultural Occupancy which will take effect one year after the tenancy
began.
A landlord must give at least a month's notice of the increase
if the rent is paid on a monthly basis or a week's notice if the rent is paid
weekly.
A landlord can then propose further increases at yearly
intervals after the first increase.
What if a tenant does not agree to a rent increase?
The tenant can apply to a rent assessment committee to decide
what the rent should be using a form titled Application referring a notice
proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy
to a Rent Assessment Committee. The committee must receive the
application before the date on which the new rent is due.
Rent Assessment Committee
They are usually made up of 2 or 3 people, usually a lawyer,
property valuer and a lay person. They are drawn from rent assessment panels and
there is no appeal against a committee's decision except on a point of law.
They may make a decision by looking at the relevant papers but
either the landlord or tenant can ask for an informal hearing which they may
both may attend.
Can a shorthold tenant apply to a Rent Assessment
Committee?
A shorthold tenant can ask a committee to set a rent at the
beginning of the tenancy if they consider that the rent being charged is
significantly higher then comparable rents in the locality.
However under the Housing Act (1996) for tenancies commencing
after 28 February 1997, a tenant can only apply to the committee once within 6
months of the commencement of an original tenancy. An application cannot be made
if the original tenancy has ended and been replaced or more than 6 months have
elapsed since the original tenancy began.
The form a tenant must apply on is titled Application to a Rent Assessment Committee for a determination of rent under an Assured Shorthold
Tenancy.
The committee will only fix a rent if it considers the rent to
be significantly high compared with rents for similar properties in the local
area. It will then decide the rent a landlord could reasonably expect to get for
the shorthold tenancy taking this information into account (if there are
sufficient properties available to rent for a direct comparison to be made).
The amount of rent fixed by the committee is then the legal
maximum that the landlord can charge.
Note that if the property is let on an Assured Tenancy,
the Landlord cannot be challenged on the rental amount in this way. However he
may face different problems in regaining possession (see section 6)
The Fair Rent System
The Rent Act 1977 set up a register of 'fair rents' for
dwelling houses. Once a rent had been registered for a property, that figure
became the maximum amount chargeable under any current or future protected or
statutory tenancy on a property.
Fair rents apply to tenancies commencing before 15 January
1989. Under the scheme a landlord or a tenant can apply either separately or
jointly to the rent officer to register a rent every 2 years. The rent officer
decided the fair rent according to the rules in the Rent Act (1977).
However the law subsequently changed and from 1 February
1999, fair rent increases were limited by linking them to changes in the
Retail Prices Index. The rent officer still determined a fair rent, but
additionally calculated the maximum fair rent according to the rules in the Rent Acts (Maximum Fair Rent) Order 1999.
This means that if the fair rent determined by the rent officer was higher than
the maximum fair rent calculated, the maximum fair rent was registered as the
rent payable for the property. The rent officer could also register a variable
amount payable as service charges.
However a judicial review in a case brought by a private
landlord in January 2000 has now ruled that introducing this form of rent
capping was outside the authority of the Secretary of State for the Environment.
The Maximum Fair Rent Order 1999 has now been quashed from its inception. The
consequence is that rents registered under these provisions are now incorrect,
and landlords should expect the Rent Service to contact them about any
correction to be made to the registered rent.
A Government appeal or an attempt to introduce legislation to cap
rents may further affect this situation. |
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