An Introduction to Assured Shorthold Tenancies (ASTs)

‍What is an Assured Shorthold Tenancy (AST)?

An Assured Shorthold Tenancy (AST) is the standard form of rental agreement in England and Wales. Introduced by the Housing Act 1988 and updated in 1996, ASTs have become the primary arrangement between landlords and tenants due to their balance of rights and flexibility.

Key Features of an AST:

• Term Flexibility: ASTs typically have fixed terms, often six or twelve months. After this period, the tenancy automatically becomes a rolling “periodic tenancy” if the tenant stays on and a new AST agreement has not been entered into.

• Protection for Both Sides: ASTs provide essential protections, such as a requirement for a written agreement and tenant safeguards against unfair eviction, yet still allow landlords to reclaim their property when needed.

Key Requirements for AST Agreements

Every AST must meet specific legal requirements to ensure fair terms and compliance. A well-prepared agreement sets out clear expectations and minimises scope for disputes.

Legal Documentation: An AST agreement must be in writing and clearly set out terms such as rent, payment schedules, and the responsibilities of the the landlord and the tenant.

Deposit Protection: Since 2004, landlords are legally required to protect any deposit in a government-approved scheme within 30 days of receiving it. Popular schemes include MyDeposits, the Deposit Protection Service (DPS) and the Tenancy Deposit Scheme (TDS). Landlords must also provide tenants with “prescribed information”, detailing which scheme is used and explaining the rights and recovery process. Failure to do so can result in penalties for landlords and make it difficult to regain possession.

Landlord and Tenant Rights Under AST

An AST provides both parties with certain rights and protections, creating a structured approach to residential letting.

For Landlords: The primary advantage of an AST is the ability to regain possession after the fixed term ends by issuing a Section 21 notice, provided all legal requirements are met. However, the Section 21 notice is due to be abolished under proposed legislation currently going through Parliament. ASTs also offer landlords flexibility in rental terms and conditions, which can be adapted to changing rental market conditions.

For Tenants: ASTs provide tenants with the right to live in a safe, habitable environment. They are protected from illegal eviction and have the right to contest unfair rent increases. Additionally, tenants are assured that their deposit is protected and can be recovered unless there is evidence of property damage or unpaid rent.

Types of Notices and Ending an AST

Understanding the process of ending an AST is critical for both parties to avoid misunderstandings or legal issues.

Section 21 Notices: Commonly referred to as a "no-fault" eviction, a Section 21 notice allows landlords to regain possession at the end of a tenancy term without providing a specific reason. The notice period is typically two months prior to the end of the first six or twelve months of an AST term, but the Section 21 notice is due to be abolished under proposed legislation currently going through Parliament.

Section 8 Notices: If a tenant violates tenancy terms - such as not paying rent or causing property damage - a landlord can issue a Section 8 notice. This notice requires landlords to specify the grounds for eviction and provide evidence if contested. Unlike Section 21, this process requires a valid reason for reclaiming the property.

Recent Changes and Reforms Impacting ASTs

The rental landscape is undergoing significant changes, impacting both new and existing ASTs.

Renters’ Rights Bill: This bill, proposed in September 2024, is expected to bring sweeping changes to ASTs by abolishing Section 21 notices and strengthening tenant protections. If Section 21 is abolished, landlords will need valid grounds, via Section 8, to reclaim properties, potentially changing the balance of control within ASTs.

Impact on Landlords and Tenants: Landlords may face increased scrutiny in repossession cases, while tenants gain increased security in their rental arrangements. Both parties should remain aware of legislative changes, as these will affect tenancy agreements going forward.

Typical Length of an AST and Rent Increases

Average AST Terms: While a minimum AST term is six months, the market often leans towards twelve-month agreements to provide stability for both landlords and tenants.

Rent Review Clauses: Many ASTs include a rent review clause, which allows landlords to increase rent after the fixed term. According to the Office for National Statistics, rents in the UK have been rising steadily, with an average increase of 4.9% in 2023 [1]. Landlords must notify tenants in advance and must ensure that any increase is fair and reasonable, and reflects local market conditions.

Dispute Resolution and Tenant Protection

Deposit Disputes: Government data shows that approximately 2% of ASTs end in a deposit dispute, often over matters such as cleaning costs, property condition or unpaid rent. To minimise the scope for disputes, landlords re required to conduct a thorough inventory checks at the beginning and end of the tenancy [2].

Alternative Dispute Resolution (ADR): Many deposit schemes offer ADR services, providing a fair and cost-effective solution for disputes without resorting to court. For example, the DPS and TDS have established processes to address common disagreements.

Comparing ASTs with Other Types of Tenancies

Not all tenancies are ASTs. Here’s a brief comparison to illustrate why ASTs are commonly preferred.

Assured Tenancies: Unlike ASTs, these provide tenants with greater security, limiting landlords’ ability to regain possession even after the term ends. This type is more suitable for long-term tenants seeking stability.

Licences and Company Lets: Licences are generally short-term agreements, often used for lodgers, while company lets cater to businesses renting for employee use. These types lack the protections of an AST and are subject to different regulations.

Current Market Trends and the Future of ASTs

With the cost of living and property prices on the rise, demand for rental properties is surging. According to Zoopla, the average UK rent increased by 7.2% in the past year, driven largely by demand in city centres [3]. Many tenants now seek longer-term ASTs, pushing landlords to consider periodic agreements that allow tenants to stay longer without renegotiating terms.

The forthcoming abolition of Section 21 as part of the Renters’ Rights Bill will undoubtedly reshape the market, potentially shifting the balance towards tenants in AST agreements. Both landlords and tenants should stay updated on these developments to anticipate how changes may impact their rights and obligations.

Top Tips for Landlords and Tenants

For Landlords: To reduce the likelihood of disputes, ensure that AST agreements are comprehensive and legally compliant. Maintain regular property checks, respect tenant privacy and stay informed of legal changes to protect your investment.

For Tenants: Familiarise yourself with your rights under an AST. Confirm that your deposit is protected, communicate openly with your landlord and ensure that you understand any rent review clauses to avoid unexpected increases.

Conclusion

Assured Shorthold Tenancies (ASTs) continue to play a crucial role in the rental market, providing both flexibility and security for landlords and tenants. As the market evolves with new regulations, understanding AST requirements, rights and current reforms is essential for both parties. By staying informed and following best practices, landlords and tenants alike can ensure a smooth and transparent tenancy experience.

FAQs:

Q. What is an Assured Shorthold Tenancy (AST)?

A. An Assured Shorthold Tenancy (AST) is the most common type of tenancy in England and Wales, providing a structured agreement between landlords and tenants. An AST allows the tenant to live in the property for an agreed period, usually six or twelve months.

Q. How must landlords protect tenant deposits in an AST?

A. Landlords are legally required to protect tenant deposits in a government-approved scheme within 30 days of receiving it. The three main schemes in England and Wales are the Deposit Protection Service (DPS), the Tenancy Deposit Scheme (TDS) and MyDeposits. Failure to protect the deposit could result in penalties and complications for landlords if they seek to repossess the property.

Q. What is the process for increasing rent in an AST?

A. Rent increases in an AST typically occur at the end of the fixed term or according to a rent review clause stated in the tenancy agreement. Landlords must provide written notice to the tenant, usually at least one month in advance, and any increase should be fair and reflect the local market. Tenants have the right to contest rent increases if they believe they are unreasonable.

Q. What are the main reasons for deposit disputes at the end of an AST?

A. The most common reasons for deposit disputes are:

• Cleaning issues

• Unpaid rent

• Damage beyond normal wear and tear

• Missing items or furnishings  

Landlords must provide evidence, such as inventory reports and photos, to justify any deductions. Deposit schemes offer Alternative Dispute Resolution (ADR) services to help resolve these disputes fairly.

Q. How can a landlord legally end an AST?

A. To end an AST, a landlord can use a Section 21 notice (no-fault eviction) if they need possession after the fixed term or a Section 8 notice if the tenant has breached the agreement (e.g., missed rent payments or property damage). Both notices have specific requirements, and landlords must ensure the deposit is protected and other conditions met for the notice to be valid. However, legislation currently being enacted under the Renters’ Rights Bill in Parliament abolishes Section 21 notices.

Q. What should tenants do if their deposit is not returned or is disputed?

A. If a tenant believes deductions from their deposit are unfair, they should first try to resolve the issue directly with the landlord. If this fails, they can raise a dispute with the deposit protection scheme holding their deposit. The scheme’s Alternative Dispute Resolution (ADR) service will examine the evidence from both parties and make a decision. Tenants can expect a fair review, but they should have documentation, such as an inventory report, to support their case.