It has been apparent for a long time that a large number of tenant’s deposits have not been protected simply because the annual rent is more than the maximum where deposit protection is a legal requirement. Some of these properties have been large prestigious properties but a much greater number have been ‘normal’ properties in places such as London where rents are so much higher. For some time the Government has been under pressure to correct or at least reduce this anomaly.

 To this end the Government has just published the Statutory Instrument which will require the maximum rent threshold for tenancies under the Housing Act 1988 (Assured Shorthold Tenancies) to be increased to £100,000 per annum.

 This will

• take effect on 1^st October 2010
• apply to England only (at least at present)
• apply to all new tenancies from that date
• apply also to all existing tenancies.

 So tenancies in existence on or from 1^st October 2010 with an annual rent not exceeding £100,000 per annum will have to be Assured Shorthold Tenancies (AST’s). However do bear in mind that just because the rent is below £100,000 per annum does not automatically mean that an AST must be created. The normal exceptions still apply such as a Company let or a situation when the rented property is not the tenant’s main or principal home

 Tenancies already in existence which are above an annual rent of £25000 per annum and less than £100,000 per annum will automatically convert to an AST on that date.

 This means in turn that the obligations of The Housing Act 2004 to protect the deposits of all new tenancies from 6^th April 2007 will therefore apply to all these newly created AST’s.

 What this means for agents is that

• An Assured Shorthold tenancy can exist where annual rent is up to a maximum of £100,000per annum
• There will be the usual legal obligation to protect deposits in all these cases
• You will need to make sure that you protect deposits for all new tenancies that apply from 1^st October.
• As all existing tenancies at that date will also need to have their deposits protected you will need to start planning this as soon as possible.

 In practical terms there are various things for agents to think about. Perhaps you may need to amend your Terms of Business and other marketing material to reflect the new requirements.

 In addition you need to identify which tenancies will convert on 1^st October and put strategies in place to deal with this. You will need to keep your   landlords and tenants informed but also may need to prepare your administrative procedures to deal with the protecting of the deposit and the provision of the prescribed information.

 There are some potential problems looming that may well be dealt with before 1^st October. These include

• A situation where a tenancy is already in existence on 1^st October and which automatically converts to an AST with the deposit being correctly protected on or before that date. The tenant could still argue, correctly, that the deposit was not protected at the beginning of the tenancy.
• What happens when a tenancy is due to end shortly after 1^st October and there is not the necessary two months to serve a notice under Section 21? Will any notice served prior to the date be valid?
• A situation where Court proceedings appropriate for a non-AST have been commenced prior to 1^st October and are proceeding at that date. The notices served will not be the relevant ones at the date of the conversion.

 It is to be hoped that greater clarity will emerge on these issues during the next six months and we understand that CLG will be issuing guidance to the Ministry of Justice in due course. However one potential way of avoiding at least some of the problems may be to start protecting deposits of those new tenancies that commence in the intervening period and that you know will convert to AST’s on the 1^st October.