A Landlord’s Guide to Tenancy Agreements
Taking the first steps of your journey towards becoming a landlord can be a daunting and confusing experience. Between rent payments, property maintenance, landlord insurance and more, entering the buy-to-let market can seem like a thankless task.
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What is a tenancy agreement?
A tenancy agreement is a contract (either written or verbal) made between a landlord and their tenant(s). Crucially, it spells out, in plain terms, the conditions and rules of a tenant’s stay, providing legal rights to both landlord and tenant alike.
As such, if both parties agree to terms, the tenancy agreement enables a tenant to live in their landlord’s accommodation as long as the rules and regulations stated in the contract are met, and for as long as the agreed period lasts.
Likewise, a landlord must uphold the terms stated within a tenancy agreement that pertain to them.
While a tenancy agreement can be verbal, it’s highly recommended to draw up a physical, written document. This provides the opportunity for future reference, should a dispute regarding the agreement arise.
It also ensures both fair rental conditions and understanding for landlord and tenant alike.
Why are tenancy agreements so important?
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Assured shorthold tenancy agreement
Assured shorthold tenancy is the most popular type of tenancy in the UK’s private rental sector. Essentially, it describes those letting residential property to private residents.
With that in mind, the assured shorthold tenancy is often the default contract in the UK and it applies to any rental accommodation that will become the tenant’s main accommodation (if the landlord lives elsewhere) and/or the landlord wishes to rent out individual rooms in a property with shared facilities.
Assured shorthold tenancy contracts are generally given for a minimum of 6 months, can last up to 12 years and can only be implemented by a private landlord or association.
Crucially, once a tenancy agreement has elapsed, the landlord reserves the right to reclaim their property from the tenant(s) (giving 2 months notice) without the need to provide legal reasoning.
However, if the landlord is happy to allow the occupants to remain after the initial term without signing a new agreement, then the arrangement automatically becomes a “periodic tenancy”.
Under the initial fixed-term period of an assured shorthold tenancy, landlords cannot raise the rent of their property without the consent of the tenant or the presence of a clause in the original rental agreement that allows such alterations.
It’s also important to note that under the terms of an assured shorthold tenancy, landlords must register their tenant’s deposit under a government-approved Tenancy Deposit Protection Scheme within 30 days of receipt.
Services such as The Deposit Protection Service and mydeposits ensure that the money isn’t withheld illegally but is still accessible should a tenant breach the terms of an agreement.
Finally, assured shorthold tenancies can’t be applied if you intend to lease the property as a holiday home, there is no rent or the rent exceeds £100,000 annually.
Assured tenancy agreement
While the assured shorthold tenancy enables a landlord to repossess their rental property without legal reason once the contract has elapsed, assured tenancy agreements remove that function and endow a tenant with increased protection against eviction.
Instead, a landlord must wait for a breach of contract under the Housing Act 1988 or until the tenant decides to move on.
If the tenant fails to pay rent consecutively, for example, then the landlord can file for a possession order against their tenant and reclaim the property.
If, however, a landlord is happy for the tenant to remain in the property once the contract has elapsed, and no further agreement is made, the contract automatically becomes a periodic tenancy, as above.
Understandably, the extra control provided by an assured shorthold tenancy makes it a much more appealing prospect for landlords.
Excluded tenancy agreement
For landlords who plan to share the same property and facilities as their tenant, an excluded tenancy agreement is the most suitable arrangement.
Under these terms, a landlord isn’t required to secure the tenant’s deposit within a Tenancy Deposit Protection Scheme. However, the tenant will qualify for “basic protection” if they live in the landlord’s home without sharing any living space with them or their family.
As such, should the landlord wish to evict them, they simply need to provide reasonable notice.
Reasonable notice is variable depending on the length of the rental period. For example, if a tenant pays weekly rent, landlords have the right to provide 1-week’s notice. However, typical notice tends to extend to 4 weeks.
Likewise, if a lodger pays rent on a monthly basis, then the period of notice would generally fall upon a month too.
Finally, if a tenant is served with notice and refuses to leave once that period has elapsed, the landlord might seek legal advice and secure a court order to evict them.
Non-assured shorthold tenancy agreement
Landlords might be unable to secure an assured shorthold tenancy agreement for their property if, for example, the rent amounts to less than £250 a year or the tenant’s main habitation is another property.
Under such circumstances, a non-assured shorthold tenancy is the most likely agreement to employ. Therein, a landlord won’t have to submit their tenant’s deposit to a Tenancy Deposit Protection Scheme, nor will they have to provide a Section 21 or Section 8 notice if they wish to evict them.
That being said, the tenant does reserve the right to stay within the property for the duration of the fixed-term agreement providing they meet the terms of the contract.
How to write a tenancy agreement
You can easily find tenancy agreement templates online and landlords can customise these to suit their tenant’s needs.
However, there are certain universally required fields:
Names and contact details of both you and tenants
It’s important to state, in plain terms, who the intended agreement is to be secured between. As such, you should include the names and contact details of both landlord and tenant(s) at the top of your agreement.
This is an agreement for an assured shorthold fixed-term tenancy between:
Tenant 1: [Name]
Type of tenancy
While the finer details of said agreement will be described as the document progresses, it’s important to state the type of tenancy at the top of your agreement.
This allows all concerned to identify any errors or shortcomings within the contract and to recognise their basic rights thereafter.
Start and end date of the tenancy
The start and end date are key for any type of tenancy.
For shorthold tenancy agreements, this informs private landlords as to when they can regain possession of their property and discuss new terms if required.
Moreover, it provides notice to both parties involved in a tenancy agreement as to when the financial rental period begins and ends.
Address of property being let
Crucially, you must provide details of the property that the agreement pertains to.
This informs both tenant and landlord alike where the tenancy will take place and also links to the disclosure of property maintenance, condition and expectation throughout the lease.
How often tenants will pay rent and the amount
In order to keep up with rent payments, the tenant must know how often to pay and what amount is expected.
This enables a tenant to ensure that they can afford the commitment they’re making, certifies that the landlord will receive fair payment on time and can be used for future reference if rent payable falls into arrears.
As previously discussed, notice periods generally align with the rental period. However, writing how much notice you intend to uphold into your contract ensures that a tenant knows their (and their landlord’s) rights and responsibilities as the end of their tenancy approaches.
Likewise, it provides legally binding evidence of your tenant’s agreement to a notice period. Thus, if the tenant refuses to recognise a written notice, the contract will aid your application for a court order.
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Absolutely. As with any contract, as soon as a residential tenancy agreement is signed, it becomes legally binding until the date that it expires.
However, depending on the terms stated within the agreement, this does not mean that the tenants are required to start paying rent from the signing date.
During a tenancy, the terms of a rental agreement can be changed if both landlord and (all) tenants agree to do so. However, neither party can implement changes without the joint agreements of the others concerned.
Once a residential tenancy has expired, then the previous terms have elapsed and different rules can be discussed.
A verbal agreement does count as a tenancy agreement if both parties have agreed upon the terms therein. However, it’s recommended that landlords seek a written tenancy agreement as this provides evidential material of the contents of the contract.
Verbal agreements are a less secure prospect. Thus, should a landlord (or tenant) need to address a failure to meet the contract, it can be difficult to prove the other side’s infidelity if they dispute the claims.
Unfortunately, such unsavoury eventualities can occur during a landlord’s tenure and so it’s important to have landlord insurance in place to help combat any financial implications therein.
With that in mind, if you’d like to find out how to secure the right landlord insurance for you and your property, either visit our website or telephone (Monday – Friday, 9 am – 5.30 pm) on 01242 32 31 31.