Urban Myth – a short let cannot be an AST

This myth is based on reality, and is due to the history of the assured shorthold tenancy (AST).

Protected tenancies under the Rent Act 1977
When the Housing Act 1988 first introduced ASTs, people were still used to the old Rent Act system of protected tenancies (although protected shortholds had been introduced by the 1980 Housing Act and there were quite a few around).

Under a Rent Act protected tenancy, a tenant instantly obtained long term ‘security of tenure’, and was entitled to stay there (so long as they behaved themselves), effectively forever, at a ‘fair rent’ (what a landlord of mine once described as ‘expropriation without compensation’).

Assured Shorthold tenancies before February 1997
The Housing Act 1988 changed all that, and with an AST, tenants could be evicted after the end of the fixed term without the landlord giving any reason at all, provided the proper procedure was followed. They could also charge a market rent.

So, when drawing up the legislation, Parliament felt that tenants need to be warned about the type of tenancy they were entering in to, and therefore imposed conditions on the creation of an AST. These were set out in section 20 of the Act and said that:

1. The tenant (who must be a new tenant, an AST could not be granted to an existing protected tenant of the landlord) had to be served a notice telling him he would not get security of tenure (this became known as a section 20 notice)
2. The fixed term must not be less than six months, and
3. The landlord did not have the power to end the fixed term earlier (i.e. there could not be any break clause in the tenancy agreement).

Although Parliament was trying to be fair, in fact this rule lead to quite a few injustices (as often tends to happen in the ‘Nanny state’). Professional landlords and agents generally got things right. However, many amateur landlords did not appreciate the need for the section 20 notice to be given in advance, and created assured tenancies by mistake.

In the 1990’s and early 2000’s, I had quite a few landlords consult me about evicting their tenants, where nothing could be done, even though in many cases the tenancy had been granted on the understanding that it would be an AST. This was because the landlord had given all the paperwork to the tenant all at the same time, meaning that the s20 notice had not been handed over before the tenancy had been entered into, as required by the Act. Therefore the tenancy could not be an AST.

Assured shorthold tenancies after February 1997
Presumably this filtered through to our law makers, because in 1996, when the Housing Act 1996 was passed, this requirement was done away with for new tenancies (although it still applies to older tenancies). By then everyone was used to ASTs anyway, and arguably did not need the protection of the section 20 notice. From 28 February 1997 when this part of the 1996 act came into force, (virtually) all tenancies were or will now be an AST automatically, and there is no need to serve a section 20 notice any more.

So now you can have a tenancy fixed term for as short a period as you wish. Most are for six months, but you can have a tenancy for a week, a month, three months and two days, whatever you want.

The sting in the tail
There is a sting in the tail though. Parliament, reluctant to abandon ‘Nanny mode’ altogether, felt that tenants still needed protection. They therefore introduced in place of s20, a rule that says that possession orders (under section 21) are not enforceable within the first six months of a tenancy (that is the first tenancy – the rule does not apply to renewals). So what this means is that a tenant can take advantage of a two month let (by moving out at the end of the second month), but the landlord cannot. If he wants his property back he can’t get an order for possession until after six months.

There have been proposals to remove this rule (sometimes known as the ‘six month moratorium’) but it does not look as if this is going to be any time soon.

This post is part of my urban myths series. You can see the rest of the series >> here.

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1. Councils planning problems for Olympic short lets