Understanding tenancy agreements

A tenancy agreement is the contract between you, as a landlord, and your tenant(s). It lays out the obligations and prohibitions of both parties. From rent to pets, the tenancy agreement is the cornerstone of any tenancy. Fun stuff (lies) ahead, so let’s get going.

This guide will cover:


Different Types of Tenancy Agreements

Fixed Term & Periodic

Regardless of whether the tenancy is an assured tenancy or AST, the tenancy can be either fixed term, or periodic.

Fixed Term:
As the name suggests, this means the agreement lasts for a fixed period of time (e.g. 6 months, 12 months, or 2 years). After that fixed term has expired, the parties can either opt to part ways, sign a new fixed term agreement, or opt for a periodic continuation.

Periodic:
If the tenancy agreement is periodic, it means once the initial fixed term period is completed – the agreement is then ‘rolling’ (with rent being paid at fixed intervals).

Assured Shorthold Tenancy (AST)

Most rentals nowadays are an AST, for two main reasons.

  1. They are preferable to landlords (as they give more flexibility for possession – more on that later)
  2. Most new tenancies are now AST by default

What makes a tenancy AST by default?

The tenancy will be an AST by default if all of the following four conditions are met:

  1. The tenant moved in on/after the 28th February 1997
  2. The tenant pays you – a private landlord – rent
  3. You don’t live in the same building as the tenant
  4. The tenant has primary control of the property i.e. no one else (including you) can just let themselves in willy-nilly
  5. The tenant is not a company
  6. The rent does not exceed £100,000 per annum

What if the tenant moved in before 28th February 1997?

If the tenant moved in before 28th February 1997, the tenancy could still be an AST, but only if:

  1. They moved in on or after 15th January 1989
  2. And you formally notified that tenant that the tenancy would be an AST (by serving a section 20 notice)

Assured Tenancy

Much less common than ASTs – assured tenancies offer fewer options for possession to the landlord. Nowadays, they are usually issued by housing associations or local councils rather than private landlords.

If you are a private landlord, what would make the tenancy an assured tenancy?

  1. If all conditions 2, 3 and 4 (above) from the assured shorthold tenancy criteria still apply, i.e.
    • The tenant pays you – a private landlord – rent.
    • You don’t live in the same building as the tenant
    • The tenant has primary control of the property i.e. no one else (including you) can just let themselves in willy-nilly
  2. But: the tenant moved in between 15th January 1989 and 27th February 1997and was not given a section 20 notice, notifying them that the tenancy was to be an AST

What if the tenancy began after 28th February 1997?

If the tenancy began after 28th February 1997, the tenancy could still be an assured tenancy (as opposed to an AST), but only if:

  1. The landlord has given the tenant formal notice that the tenancy would be an assured tenancy
  2. Or the landlord includes such a declaration in the tenancy agreement

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What a Tenancy Agreement Should Include

 Every tenancy agreement should always include:

  • Full names (first & last) of all involved parties
  • Address of the property
  • Start date and end date (of any fixed term) of the tenancy
  • The rent amount, and manner of payment. If it’s an AST, you should also include whether rent is to be paid in advance of the month (normal practice) or in arrears (i.e. at the end)
  • List of all bills related to the property, and who is responsible for their payment (e.g. council tax, utilities etc.)
  • Information on how and when rent will be reviewed. In particular, it should give details regarding rent increases
  • The deposit amount, and its protection method
  • Reasons for some or all of the deposit to be withheld
  • Tenant vs. landlord obligations, including who’s responsible for minor repairs
  • When and under what circumstances the tenancy can be terminated early
  • Conditions regarding sub-letting
  • Specific prohibitions which you as the landlord have created (e.g. no-smoking, no pets)
  • Most importantly – the tenancy agreement needs to be signed and dated by all parties

Take note:

If the tenancy agreement includes any terms which violate the Unfair Terms in Consumer Contracts Regulations 1999, then that particular term will be void. So there’s no point trying to slip ‘tenant must walk my dog twice weekly’ in to the small print!

 

 

Top tip:

It’s a good idea to include a clause in your tenancy agreements which states that the tenant must notify you if they change utility suppliers. That way you can contact the supplier relatively painlessly at the end of the tenancy, and avoid spending the rest of your life on hold listening to crackly music. There’s only so much Greensleeves one can take, after all.

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Handling of Deposits

By law, any deposit a landlord takes from a tenant must be held in a government-backed tenancy deposit protection scheme. If the tenancy is an AST, there are three options for registering the deposit:

  1. Deposit Protection Service (Custodial and Insured)
  2. MyDeposits
  3. Tenancy Deposit Scheme

Landlords must register the deposit within 30 days of receiving the money and provide the tenant with full details including the schemes prescribed information and terms and conditions of business. Failure to comply may result in heavy fines.

(We use the Deposit Protection Service, and include deposit registration as standard if you buy our tenancy agreement service).

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‘High-use’ Sections of the Housing Act 1988

Whatever the details of your tenancy agreement, there are four section notices you should know like the back of your hand (bet you just looked at your hand). These are:

Section 8 notice (to quit)

This is issued when the landlord wants to end the tenancy during its fixed term, by invoking one or more grounds listed in section 8 ofThe Housing Act 1988 e.g. substantial rent arrears.

For a full list of acceptable grounds for serving a section 8 notice, see our guide: Advice for Evicting Tenants.

Section 21 notice (requiring possession)

Unlike a section 8 notice, landlords can only serve a section 21 notice at the endof the tenancy’s fixed term. It’s sometimes called a ‘no fault’ possession, as it doesn’t require that the tenant has violated any conditions of their agreement, or require appeal to any other legal grounds.

Section 13 notice

Section 13 notices are used when the landlord wishes to increase the rent when the fixed term of that tenancy is coming to an end. (To find out about raising the rent during a tenancy’s fixed term, see the FAQs below).

Section 20 notice

We mentioned this one earlier on. If the tenancy in question began prior to 28th February 1997, then a section 20 must have been issued to the tenant in order for that tenancy to be an AST, rather than an assured tenancy.

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FAQs Regarding Tenancy Agreements

Can I alter an existing tenancy agreement?

Yes and no. You can, provided you can get the tenant(s) to agree to the changes, and sign the altered contract.

If they won’t agree, your other options are to either stay put with the agreement as is, or to evict them, if the agreement allows

Can I raise the rent during a tenancy?

You can never raise the rent during the initial fixed term of a tenancy, unless a mutually agreed clause has been inserted into the agreement to do so.

After that, you can – provided you give minimum notice. Minimum notice is equal to the regularity of rental payments.

e.g. if your rent is paid monthly you must give a minimum of one calendar months’ notice.

Take note:

Any clause which says you can alter the rent as and when you fancy will most likely fall foul of the Unfair Terms in Consumer Contracts Regulations 1999 – so won’t be enforceable by law.

Can I gain repossession of the property during its fixed term?

To gain repossession of your property – i.e. evict your tenant(s) – during the fixed term of a tenancy, you have to issue a section 8 notice, appealing to one or more of the legitimate grounds it lays out. For a full list of acceptable grounds, see our guide: Advice for Evicting Tenants.

Can I prohibit my tenant(s) from subletting the property?

The Office of Fair Trading has suggested that it could be deemed unfair (and therefore unenforceable by law) for landlords to lay down an absolute prohibition of subletting in a fixed term tenancy agreement..

However, you could certainly include in your tenancy agreement a condition like:

“Subletting is not permitted without first seeking consent of the landlord”

At that point, you could reasonably ask to meet (and reference!) the person who would be being sublet to – to give you a little more peace of mind.

Besides, if the tenant needs to sublet to keep up with rent payments – you’d be shooting yourself in the foot to deny it wholesale. You’d either be causing yourself the likelihood of arrears, or the likelihood of a void period. Neither are desirable.

Take note:

If your tenant does sublet the property, be aware that it may make your property subject to HMO status (House of multiple occupation). HMOs have different regulations and landlord obligations which you should be aware of.

 

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