What are the key features of an AST? What common issues do they raise for schools? What new rules apply to ending ASTs granted after 1 October 2015?
What's an Assured Shorthold Tenancy?
- An AST is a common type of residential tenancy. It often arises where a tenant has exclusive possession of property, paying a rent, and using the property as their principal home.
- Granting an AST formally gives certainty to both parties as to the terms of an employee's occupation and will set out the obligations of both employee and employer relating to the property.
- An AST cannot be terminated within the first 6 months (except for serious or persistent breaches).
- After the contractual letting period has expired, the terms of the tenancy will continue, generally until notice is served to terminate the tenancy. Such notices must be served in strict compliance with the statutory provisions of the Housing Act 1988.
Common Issues for Schools to Consider
- Schools with charitable status must also comply with their duties on disposals of land (which applies to lettings as well as freehold sales) to a connected party (including employees).
- An AST can take time to terminate (in contrast to other occupational arrangements, such as service occupancies). This can cause particularly acute problems in the event that a school requires the tenant to vacate immediately (for example due to safeguarding issues).
- In some geographic areas, landlords must conduct identity checks on all occupiers before entering into a tenancy, to ensure that the tenants have a 'right to rent' under the Immigration Act 2014. There are exemptions to these rules for tied accommodation, which may assist some schools, but care should be taken to check whether these exemptions apply.
- There may be tax implications for granting an AST to an employee, if the arrangement is considered to confer a taxable 'benefit in kind'. Further specialist taxation advice may be required to assess the impact of granting an AST.
Can You Terminate an AST?
Strict rules apply to the termination process for an AST. Generally, a school will look to end an AST after the contractual term has expired and we will concentrate on the process in those circumstances.
In light of changes to the rules since 1 October 2015, the process now involves:
- A requirement to provide further information to tenants at the outset of the tenancy including a government published handbook informing tenants of their rights, an Energy Performance Certificate for the property and a gas safety certificate (where appropriate) for the property.
- Service of a written notice on the tenant, giving at least 2 months' notice to terminate the AST.
- Full compliance with the complex rules applying to the registration of rent deposits is also required to ensure that an AST can be terminated properly. In our experience, schools do not often require rent deposits of employees.
Issues to Consider Before Terminating an AST
- If a tenant refuses to vacate when an AST has been ended validly, a court order is required before possession of the property can be lawfully recovered. This can take further time (typically at least 12-15 weeks to obtain a court order and for bailiffs to attend).
- In the event that there are unresolved issues concerning the state of repair and condition of a property, there is a risk that a landlord will be unable to terminate an AST or obtain a court order to recover possession of the property, for a period after the issues are resolved (or determined by the Local Authority to be insufficiently serious to prevent eviction).
- A tenant is now entitled to the return of any rent paid beyond the period of his or her occupation of the property.
How Can We Help?
We can offer legal advice and guidance on all aspects of granting, documenting, managing or terminating occupational arrangements concerning school accommodation.
Please contact Daniel Hall in our Commercial Property team on 0117 314 5315 if you would like further information.