What Is Regulated Tenancy?

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As you shop for the best investment property, you may come across those that already have tenants, sometimes listed as tenants in situ, meaning tenants are already in the property. While many of these are fairly straightforward rental situations, some fall under a different category called regulated tenancy. What are regulated tenants, and what does buying this type of property mean in terms of tenancy law in the UK?

What is a Regulated Tenancy?

Your first question if you see this type of listing is likely “What is a regulated tenancy?” Don’t worry. You’re not alone in asking this question. Many ads use the term regulated tenancy, meaning these tenants have more rights than a standard tenant does. How exactly does the UK define regulated? These are leases that date back quite some time – all the way back to 1977. At that time, the UK had just passed the Rent Act of 1977. In the Rent Act of 1977, the regulated tenancy meaning is spelt out. Any tenancy that was created before 15 January 1989 is considered to be a protected tenancy in this sense. Regulated tenants have the right and security to remain on their property for the rest of their lives. A regulated tenant has their rent set by a Rent Officer who works for the Valuation Office Agency. Regulated tenants typically pay lower than market rent, and it tends to stay that way because the amount can only be increased every two years. To do so, the landlord must apply to the rent officer. In short, the answer to the question “What does regulate mean when it comes to tenancy” is that it is regulated by a party besides the landlord thanks to the 1977 Rent Act that established statutory tenancy and this type of regulation.

What Does Assured Tenancy Mean?

In many situations, you’ll see the term assured tenancy. This term is used meaning tenancy that is regulated by the same act. You may also see the term AST used in these situations. Advertisements use AST meaning property that is subject to these regulations as well. It stands for Assured Short-Term Tenancy, and while they have many of the same rights as regulated tenants, it’s typically for a much shorter term than the life term that a regulated tenancy provides.

How Does This Differ From Tenants’ Rights After 10 Years in the UK?

You may be familiar with the idea that tenants’ rights after 10 years change somewhat. They have what’s called “long-term security of tenure.” What that means is that they can remain on the property unless you can establish legal grounds for eviction. They may also have some level of protection against certain rent increases. All of this, though, will be carefully established in your initial lease and the regulations that apply to that property. These are not regulated tenants. Those are the only tenants who signed agreements that fit within the Rent Act of 1977. Consult with your solicitor if you have questions about those tenants who have remained with you for a decade.

Is This Investment Worth It?

If you’re wondering whether to invest in a property with tenants in situ who have assured tenancy, you might be surprised at the benefits involved. Remember, that you’re still dealing with a private tenant, meaning that much of the same kinds of tenant-landlord relationships you’re familiar with apply. If you buy a property like this, you’re probably inheriting a tenant who has already been there for many years. In most cases, those kinds of tenants are great because they usually treat the property as if it’s their own, and they don’t usually contact the landlord every single time something goes wrong. That means you’re going to have far fewer problems with these tenants, and you’re likely to have to do less maintenance on the space than you might with another.

While you are still legally responsible for ensuring that your property is well cared for and your tenants are looked after, your tenants are less likely to be volatile or problematic. These kinds of situations, therefore, tend to appeal to landlords who are looking at long-term capital in terms of their investments. The value of the property may initially be less, but over time while your tenant remains in place, it will go up. Once that tenant vacates the property, you benefit from quite a lift in property value.

Before You Buy!

If you are thinking of investing in a property that has a regulated tenancy, keep in mind that in some agreements, there are rights of succession in place. Depending on exactly what that agreement looks like, it’s possible that the tenant’s next of kin may be able to get the property once the original tenant dies. If anything happens, the next of kin can take over on an assured basis. That requires them to pay market rent, but they have the right to remain in that space for life.

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