They constitute a lasting agreement between landlord and tenant and allow the tenant the right to continue living in the property for their lifetime.
The circumstances that enable a regulated tenancy are restricted now, and they are therefore becoming increasingly rarer as the years go on due to the current pool of regulated tenants ageing. There are currently less than 75,000 Regulated Tenancies in the whole of the UK, compared to the complete number of tenants being around 4.5 million in England alone.
One of the most important features of a regulated tenancy is the constraint on how much a landlord can charge for rent.
Landlords can charge a rent that is any amount under a value that is determined as Maximum Fair Rent by an officer from the Valuation Office Agency. This amount is usually under the market rent value. The fair rent amount can be reviewed, if a landlord chooses so, every two years.
This value will be decided based on all circumstances of the property aside from those which the tenant was responsible for. This includes property information like age and location, its state of repair and the provision of any furnishings.
A landlord can increase the rent that they charge, provided it does not exceed the Maximum Fair Rent amount, by serving a notice of rent increase form. This can be backdated for up to 4 weeks.
If there is no registered Maximum Fair Rent but both the landlord and the tenant agree on a rent amount between them then this is permitted, provided it is included within the tenancy agreement.
A regulated tenant may be evicted by a court order if one or more cases apply as listed in the Rent Act 1977.
There are 20 cases in total, with case 1-10 being discretionary cases that don’t automatically result in the courts granting an eviction.
Case 11-20 however are mandatory cases that will result in the court granting an eviction order. The only prerequisite for these being that the landlord satisfies two other cases: the landlord must have given a written notice to the tenant when or before the tenancy began informing them that they may apply for possession in the future, and that the landlord should need possession of the property when a case is met.
Again, this is another circumstance listed in the Rent Act 1977. If the original tenant dies, the regulated tenancy will pass to their spouse if they lived in the property with them at the time.
If there is no spouse, then any family member or successor who has been living with the original tenant in the regulated property for two years prior to the tenant’s death will inherit the tenancy.
There is a limit to the number of successions at two, and the second successor must also be a part of the original tenant’s family.
All of this information may lead you to believe that investing into a regulated tenancy is a bad idea, but there are advantages for doing so.
First of all, property with a regulated tenancy agreement in place is often sold at a significant discount when compared to the value of the property if there were another type of tenancy agreement in place like assured (or assured shorthold) tenancies, or if the property was bought with vacant possession. When the regulated tenancy ends, you will be left with a property that has a much higher market value than what you paid for it.
Secondly, regulated tenants have a reputation for being more independent than standard tenants and treat the property as their own. This means there will be less contact from a tenant if anything were to go wrong, although you will still technically be responsible for the repair and upkeep of the property as is expected of landlords.
So, for investors searching for a quiet asset that is set for long-term profit and growth then regulated tenancies may be a good option for your portfolio.
If you are either a landlord or a tenant and you are unsure if your agreement falls under the classification for a regulated tenancy then you can contact the county court and they will arbitrate for you.
You may be able to apply for Legal Aid to help with the court costs.
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