Katie Wiesendanger discusses the upcoming change within the Renters’ Rights Act 2025 which puts an end to the ‘AST trap’.
The Renters’ Rights Act received Royal Assent on 27 October 2025, with the first wave of its changes coming into force on 27 December 2025. One of the changes it will make is to force an end to the current ‘AST trap’ (this is where long residential leases can be classified as assured shorthold tenancies (ASTs), exposing leaseholders to eviction for non-payment of ground rent) in relation to ground rents in residential long Leases.
The current position relating to ground rent, is that landlords can evict their residential tenants who default on ground rent payments. Section 8 of the Housing Act 1988 sets out the mechanism for this.
Essentially, where ground rent exceeds £250 per year (or £1,000 per year in Greater London), the tenancy granted by a Lease is considered to be an assured shorthold tenancy. In these instances, a landlord can terminate the Lease should the tenant fail to pay ground rent. If the tenant is still in arrears by the time of a court hearing, then the judge would have no option but to make the order to forfeit the Lease without compensation to the tenant. Whilst some parties can insert a term into the Lease stating that this mandatory ground will not apply and will not be used against the tenant, this relies on the willingness of the landlords to do so. Mortgage lenders do not like the idea of losing their security by the borrower’s default, and typically insist on indemnity insurance, or a deed of variation to the Lease, to reduce this risk. However, from 27 December 2025, this is all changing.
One of the changes to be implemented is that a long-term lease (for a term of over 21 years) will be excluded from being defined as an assured tenancy. This is by virtue of section 31 Renters’ Rights Act which inserts the new paragraph 3D of Part 1 of Schedule 1 of the Housing Act 1988.
The change does not specify if it is limited to new leases, so it is possible that this can affect all current long-term Leases, although this is yet to be clarified.
There is also an additional paragraph 3E which specifically excludes Leases between 7-21 years before the Renters’ Rights Act came into force.
This is a welcome change, and theoretically, deeds of variation to exclude section 8 of the Housing Act 1988 (and therefore being treated as an assured shorthold tenancy) should no longer be needed. In addition, mortgage lenders should stop requiring an indemnity insurance policy to protect them against the risk of the landlord using ground 8 to gain possession of an assured tenancy if rent arrears exceed two months.
Whilst this is good news for tenants and sellers, a high ground rent could still be onerous for purchasers of leasehold properties, and so the practical implications of the amount of ground rent and its mechanism for increase over the years will still need to be considered.
We are yet to see if mortgage lenders will loosen their requirements, and whether they still require onerous ground rent provisions to be amended by a Deed of Variation.
After the end of the “AST trap”, landlords would need to rely on their right of forfeiture for non-payment of ground rent.
