The proposal to increase the AST threshold had been broadly welcomed as an attempt to offer greater clarity and transparency for landlords and tenants. However, the NLA believes the proposals have the potential to be damaging to a significant number of landlords who entered into contractual tenancy agreements in good faith.
For reasons the government has not fully explained, it seems that a quirk of the process means the change will be retrospective and will be applied to existing tenancies, according to the NLA. As a result, any tenancy with an annual rent between £25,000 and £100,000 in existence on 1 October 2010 will become an AST overnight.
Landlords and tenants will no longer be able to negotiate individual terms for their tenancy and the rights and responsibilities associated with the Housing Act 1988 will be extended to these higher rent properties.
David Salusbury, chairman, NLA, said: “Although we are still piecing together the facts, the retrospective nature of this change is highly regrettable, and it could have a wide-ranging impact on the letting of private residential property. For example, landlords in this higher rent bracket will have to protect deposits for the first time. If they fail to do so by October 1 2010 they could be in breach of the law. We are told the courts are being forewarned.
“The NLA believes the Government is rushing through this change without fully thinking through the consequences. We call for greater consultation to ensure this measure does not have a negative impact on the private-rented sector. We will continue to provide the most up-to-the minute help and advice on the issue to landlords. We have published a guide to help landlords comply with the law and will continue the press the Government for further consultation.”