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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.
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:
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.
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.
