Common law tenancy changes on 1 October 2010
As you should be aware by now, on 1 October (unless the coalition government decide to change things) all non regulated/common law tenancies where the rent is between £25,000 and £100,000 will convert automatically to assured shorthold tenancies.
Except that some of them won’t.
As pointed out by the PainSmith blog, in some circumstances, the tenancy will become an assured tenancy. Which will be very serious, because assured tenants have long term security of tenure. This means it is very difficult to evict them.
So a tenant who now can be evicted after service of a 4 week Notice to Quit, will then only be vulnerable to eviction if they fall into arrears of rent, or if the landlord is able to find them suitable alternative accommodation.
When a common law tenancy will convert to an assured tenancy
The situations where tenancies will convert to assured tenancies are:
- Where the tenancy was an assured tenancy originally but turned into a common law tenancy after the rent was increased to more than £25,000, or
- If the tenancy was created before 27 February 1997. The reason for this is that for a tenancy created before 27 February 1997 to be an assured shorthold tenancy, the landlord had to serve a section 20 notice, properly drafted, on the tenant before the tenancy agreement was signed. If all parties thought that the tenancy was to be unregulated, it is most unlikely that this will have been done.
This rule change will not affect many properties, but where it does, it will be a very significant change and will substantially affect the value of the property.
If you are a landlord of a long running high value tenancy you need to consider whether this is likely to happen to you. If so, there are two courses of action you can take.
- Evict the tenants as soon as possible This is the safest course of action.
- Sign a deed of surrender and then re-let as an AST. This is suggested by PainSmith on their blog post. It is better to do this than nothing. However you would run the risk that if you later wanted to evict the tenants, they might be able to challenge the validity of the surrender, if in fact they continued to live in the property uninterrupted.
What do you think? Do you think a surrender and re-grant will be effective or do you think all landlords should play safe and evict?