What was the “AST Trap”?

The Housing Act 1988 (the “Act”) originally provided that a tenancy could “accidentally” qualify as an Assured Shorthold Tenancy (“AST”) if:

• Ground Rent exceeded £250 per year (or £1,000 in Greater London); and
• The property let was a dwelling (meaning the property was the owners only property or was their main residence).

Therefore, the trap of this legislation was that that some long residential leases could be deemed to be an AST and treated as such where the above criteria were met.

You may wonder why this was an issue or what practical difference this made and the simple answer is that it greatly impacted the criteria for repossession of the property in question.

Where a property could be deemed to be an AST, the freeholder could rely on the repossession procedure which was set out for ASTs and was intended to assist with evicting tenants who were occupying a property under a short tenancy. Essentially, this trap meant that if a leaseholder was in more than three months’ worth of arrears on their ground rent the freeholder could initiate repossession proceedings which would essentially always result in eviction and the property being returned to the freeholder, regardless of the purchase price previously paid for the property, leaving many leaseholders out of pocket. This was therefore a significant risk to leaseholders of long leases who’s property could be deemed an AST under the Act.

Due to this trap, mortgage lenders were cautious of lending on property which was deemed to be an AST under the Act (or which could become an AST during the term of the mortgage). This caution led to delays in the conveyancing process because either a Deed of Variation or an indemnity policy was required to protect the mortgage lenders interest which added costs and complexity. In some cases, mortgage lenders refused to lend and transactions fell through altogether.

What has changed?

The good news is that The Renters Rights Act 2025 has fixed this issue.

As of 27 December 2025, the new Act has removed long leases from being considered as ASTs under any circumstances and freeholders are no longer allowed to rely on the repossession grounds for arrears of ground rent.

This means that for prospective buyers and sellers, one of the main issues that was previously delaying leasehold transactions has been resolved.

If you are thinking of buying or selling a leasehold property get in touch with our conveyancing team who are happy to help you through the process.