Written by Chris Richards, Managing Director
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.
Moreover, if you're unclear about what your tenants should expect of you and indeed what you should expect of them, it's a recipe for a troubled relationship - and that benefits no one.
Therefore, it's important to clarify all the relevant content before your tenant(s) takes their first step over the threshold, and this is done by means of a tenancy agreement.
Thus, to help you navigate the undulating seas of tenancy agreements and make your time as a landlord more plain sailing than choppy waters, we're exploring the ins and outs of tenancy agreements in crystal clear, bite-sized chunks.
Furthermore, if you need help identifying the right landlord insurance for you and your property, here at Utility Saving Expert, we're dedicated to finding the best landlord insurance available across England and Wales. So if you're in need, don't hesitate to get in touch.
Now, without further ado, let's begin our landlord's guide to UK tenancy agreements.
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.
Tenancy agreements are so important for a couple of reasons, the most pertinent of which, is that they provide clarity.
Making sure you and your tenants meet all the expectations required for a successful landlord-tenant relationship can feel like a bit of a juggling act.
However, assembling a document that spells out the rights and responsibilities of both parties in simple terms is an easy way to provide a clear explanation of what is expected of them for the duration of the agreement.
The second reason tenancy agreements are so important is that they provide a reference point, for both parties, should either fail to meet their predetermined expectations. As a result, it is a vital document for any landlord and tenant.
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.
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.
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.
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.
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.
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:
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]
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.
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.
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.
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.
Every landlord enters the market with a view to hosting the perfect tenant. Clean, responsible, prompt with their payments. With the best will in the world, you're unlikely to host a residential tenancy that doesn't have its fair share of bumps along the way.
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