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Rentify have put this guide together to help you navigate the world of contracts and tenancy agreements.
We all know contracts are boring but essential. If you take the time to get your head around the finickity legal bits now, and plan properly from the start, you'll be saved time and expense in the long term. After all, a clear and fair contract will be the cornerstone of any harmonious relationship between landlord and tenant.
As a landlord it is essential that both you and your tenant know your rights and obligations for example:
Can the property be sub-let?
Can I stop by to check on the property without warning?
How much notice must be given? These are all issues which may arise when privately letting a property. And this is where this helpful guide comes in. It will inform you of the options you have at your disposal, whatever the situation.
We understand your time is valuable. If you’re overwhelmed with managing your property, we can do it all for you through our let my property or <%= link_to 'full management services', services_manage_my_property_url %> or call us today on 033 3014 8505.
The contract between a landlord and tenant will, in the vast majority of cases, take the form of a tenancy agreement.
The purpose of the tenancy agreement is:
To set out the amount of rent to be paid by the tenant in order to live in the landlord's property
To establish the rules with which each party must comply for the continued rental of the property.
The contract may also take the form of a license rather than a tenancy agreement. These are highly unusual so for now it is just worth noting that a licence grants the licensee (i.e. the person allowed to live in the property) less protection from eviction. It therefore tends to be used for short term rentals or, more usually, for rentals where the licensee does not have exclusive occupation and shares, for example, the bedroom.
|Short-term rentals||Long-term rentals|
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Both tenancy agreements and licenses can be written down or verbally agreed . In reality, a verbally agreed contract is always going to be tough to demonstrate, so it's in the best interests of both parties that the landlord puts any agreements into writing. This ensures all rights and responsibilities agreed beyond those prescribed by law are as clear as possible. And any disputes can be resolved more easily. Furthermore, without a written agreement the landlord will not have recourse to the benefit of an accelerated repossession of the property, if it is required (more on that later). As the old saying goes, 'prepare for your divorce before you finalise your marriage'.
Once a tenant has moved in, he or she cannot be required to sign a tenancy agreement so a landlord should make sure it is signed beforehand. A strange one this, but then a lot of the law is tenant-sided, so be aware! If, on the other hand, the tenant requests in writing a written statement about the following terms of the tenancy, the landlord must by law comply within 28 days:
The date the tenancy began
The amount of rent payable and the dates on which it is to be paid
The length of the fixed term arrangement, if one has been agreed
Rent review arrangements, if applicable
Sign two copies of any agreement: the landlord should have one signed by the tenant, and the tenant should have one signed by the landlord.
Finally, it is important to remember that any contract between landlord and tenant is binding only insofar as its conditions do not break the law. For example, a clause cannot be inserted forcing the tenant to go to the pub with the landlord twice a week and pretend they're mates (trust me). Both landlord and tenant have legal rights and responsibilities which no tenancy agreement can ignore or override. Precisely what these rights and responsibilities are depends on the type of tenancy agreement or license. So with that in mind...
There are two basic, different types of tenancy agreement: an Assured Shorthold Tenancy (AST) and an Assured Tenancy. Although their names are very similar, they carry a different set of obligations. Like Emily Watson and Emma Watson.
It will be useful to have a quick look at of four types of section notice you will need to know about whatever your tenancy agreement. These are official notices you must supply to the tenant to inform them of certain things. They all refer to sections of The Housing Act 1988 .
Section 8 Notice
Issued when the landlord wishes to end a tenancy on one or more of the legitimate grounds also listed in The Housing Act 1988 (we'll look at these in more detail later).
Section 13 Notice
If you wish to increase the rent when a fixed term of a tenancy is coming to an end, you can do so by issuing a Section 13 notice. The fixed term is the length of time you and the tenant have agreed the tenancy should run for .
Section 20 Notice
In order for a tenancy to be an AST prior to 28 February 1997, a Section 20 must have been issued by the landlord before the tenancy started.
Section 21 Notice
Issued when the landlord wishes to claim 'no fault' possession of their property from the tenant (i.e. without giving a reason). This is only available with an AST and can only take effect at the end of a fixed term at least 6 months after the tenant has moved in.
This is the bread and butter of tenancy agreements, covering the most common type of rental situation between a private tenant and private landlord.
If all of the following apply, then you automatically have an Assured Shorthold Tenancy on your hands:
The tenant pays rent to you as a private landlord
You and the tenant live in different properties
The tenant has control of the property such that you (or any others) cannot enter it as they please
The tenant moved in on or after 28 February 1997 (that's right: Ainsley Harriot's 40th birthday!). Alternatively, the tenancy began between 15 January 1989 and 27 February 1997 (inclusive) and the landlord issued notice of the AST before the tenancy began.
Today any new private rental which matches these criteria will be an AST by default, unless the landlord has taken the necessary steps to set up an Assured Tenancy. Generally speaking, this rule favours the landlord: an AST gives the landlord more rights over the possession of the property.
Furthermore, if the property is subject to a mortgage, most lenders will insist that the tenancy is an AST .
The fact that AST s are now the 'default' means that Assured Tenancies are much less common. Also, the security of tenure which they offer makes them less appealing to landlords. On the other hand, this security may make them for suitable if you are letting to a family member or long-time pal.
The criteria for having an Assured Tenancy are the same as those above for having an AST with the following important exceptions:
Tenancies created between 15 January 1989 and 27 February 1997 (inclusive) are automatically assured tenancies, unless a Section 20 notice was issued by the landlord to declare it an AST
Tenancies beginning on or after 28 February 1997 are assured tenancies if and only if the landlord gives the tenant notice that it is an assured tenancy or inserts a declaration that it is such into the tenancy agreement. This can be done before or after the tenancy has started, provided that both parties agree.
An AST or Assured Tenancy may be either:
Fixed term: the agreement lasts for a fixed length of time (weeks, months or years)
Periodic: the agreement rolls on indefinitely with rent paid at fixed intervals throughout
The landlord's rights and options also vary depending on which of these types of tenancy is held.
An AST is generally preferable to an assured tenancy for a landlord as it makes it easier for him or her to regain possession of the property:
In accordance with Section 21 of The Housing Act 1988, an AST gives the landlord the right to regain possession of the property without providing a reason ('no-fault' possession)
With an assured tenancy no such 'no-fault' allowance exists. The tenant has the right to remain in the property unless the landlord can prove he or she has grounds for possession or until the tenant chooses to leave
The AST's 'no-fault' possession can only take place after any agreed fixed term has expired and with the serving of at least 2 months written notice (known as a Section 21 notice). The repossession can only take place a minimum of 6 months after the start of the tenancy
It is worth noting that even with a periodic AST6 months must elapse from the start of the tenancy before the landlord can legally regain possession of the property
A tenancy cannot be an AST or Assured Tenancy if:
The tenancy began, or which was agreed, before 15 January 1989 (this will normally be governed by the provisions of the Rent Act 1977)
The property is not the only or principal home of the tenants
The rent is more than £100,000 a year
The rent is £250 or less a year (£1,000 or less in Greater London)
It's a company let
The tenancy has been granted to a full-time student by an educational body
It's a holiday let
It's a letting by a resident landlord (the landlord and tenant live in the same building, most commonly when landlord and tenant share a part of the accommodation). This is usually a licence situation not a tenancy.
Essentially, if the landlord shares the property with the tenant or is offering a 'serviced' accommodation and so needs to access it regularly, there can be no tenancy and a license may be required. A 'serviced' accommodation is one in which the landlord is responsible for things such as cleaning and/or providing meals.
Under a tenancy a landlord must clear any visits with the tenant, who is the legal occupier of the property. This is not the case with a license.
The legal distinction between a license and an AST or Assured Tenancy is that the former only allows the licensee to use the property, not occupy it in a legal sense. An AST and Assured Tenancy both allow occupation of the property.
If you have gone to the trouble of finding a suitable and reliable tenant you may be very wary of allowing them to sub-let the property, especially without your permission. You should be aware that the Office of Fair Trading has issued guidance to the effect that it could be unfair and unenforceable to absolutely prohibit sub-letting in a fixed term tenancy agreement. A periodic tenant cannot sub-let unless the landlord agrees.
Still you can take steps to avoid or at least limit fixed term sub-letting.
Make sure the agreement only allows for sub-letting with the consent of the landlord (although this consent cannot be unreasonably withheld)
Alternatively, make it easy for the tenant to end the agreement if they cannot find a good sub-tenant
If the landlord has found a suitable new tenant, it is wise to allow the original tenant to end the agreement early, if they wish, rather than sub-let
In most situations a landlord should take a deposit to help support the tenancy agreement and gain protection in case (for example):
The tenant damages the property or items in it
The tenant fails to carry out reasonable obligations from the agreement such as ensuring the property does not become a filthy hellhole
The tenant fails to pay rent or consistently tries to pay with Monopoly money
The Government introduced a statutory deposit protection scheme in the Housing Act 2004 . This safeguards all deposits taken under an AST after 6 April 2007 or any AST that has been renewed since that date. No other types are covered (including Assured Tenancies).
There are two types of scheme: an Insurance Based Scheme or a Custodial Scheme . In both cases, the tenant pays the deposit to the landlord, who pays it into the chosen scheme, and the landlord must inform the tenant of the details of the scheme.
Insurance based schemes
The landlord holds the deposit but must pay a fee for the premium
Any disputed amount at the end of a tenancy must be paid to the scheme by the landlord. The scheme then pays out the money when the dispute is resolved (either to you, to the tenant or a bit of both)
If the landlord does not pay (or pay enough) when requested, the scheme can claim on the insurance and so still pay the tenant their due
If there Is no dispute, tenants will often get the money back more quickly with this scheme as the landlord can pay them directly instead of waiting for the custodial scheme to refund the money.
The scheme administrators hold the deposit but there is no fee as charges are paid by the interest on the deposit
The deposit must be paid into the scheme within 30 days of receipt from the tenant
Custodial schemes are often used by smaller landlords
The scheme pays back the money and the tenant will also receive a proportion of the accumulated interest
The government has selected three service providers to run Tenancy Deposit Protection Schemes:
The Deposit Protection Service (the DPS)
My Deposits (run by Tenancy Deposit Solutions Ltd.)
The Tenancy Deposit Scheme (run by The Dispute Service)
Custodial and insurance based schemes both have a service which deals with any deposit disputes, to avoid such matters going to the courts. This is known as the Alternative Dispute Resolution Service (ADR) and can only be used if both landlord and tenant agree (otherwise the dispute must indeed go to court).
Mainly in the case of dealing with certain vulnerable tenants, bond guarantee schemes are available to landlords. Here upfront cash deposits are replaced by the scheme, which then also covers any rent arrears, damage etc. Contact your local authority for the details of any such schemes in your area.
It is obviously good form to pay back the deposit as quickly as possible, if there's no dispute; no later than 10 days after the end of the tenancy is a good rule of thumb.
Please see Rentify's 'Landlord's Guide to the Law' for your legal rights and obligations during the period of tenancy.
The landlord's options for changing the terms of a tenancy agreement are fairly limited:
The landlord and tenant must agree on any changes to the agreement and should record them in writing
Of course, if the tenant refuses to any proposed new terms, there is the option of evicting them with the Section 21 notice.
This really should be covered by rent review clauses in any tenancy agreement.
If the tenancy is fixed term, there should be a clause either fixing the rent for the length of the term or stating that it will be reviewed at regular periods. Without such a clause it is usually not possible to review the rent during a fixed term
It is very unlikely that any clause which states you can review or raise rent as and when you want will be enforceable. Tenants are protected by Unfair Terms in Consumer Contracts Regulations
So there usually must be a justifiable reason for any raises, such as general cost increases as reflected in the Retail Prices Index or if significant improvements to the property are made (e.g. jewel-encrusted swimming pool on the roof)
Another simple way to raise the rent is simply to get the tenant to agree to a rent increase.
Talk to the tenant first to explain your reasoning and gauge their reaction
If they agree, send a letter and get them to sign, date and return it. If they do not do this and do not start paying the new rent, the increase will not be valid
Alternatively, if you inform the tenant of any rent increase and they simply start paying it, this is taken as agreement to the raise. If they do not pay it, the increase does not take effect and you must seek an alternative method
Finally, with an AST or Assured Tenancy a landlord may increase the rent by the formal procedure of notice under Section 13 of the Housing Act 1988.
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One month's notice must be given when serving the form on a tenant
If this is adhered to and the tenant does nothing, the increase takes effect
The increase may only take effect after the fixed term has ended
Rent increase under Section 13 may only take place once every 12 months
With a fixed term AST it is worth discussing any Section 13 rent increase in advance of the required one month's notice. If the tenant is planning on disputing it, it may be better for you to end the tenancy under the Section 21 'no fault' possession order, which requires 2 months notice.
If the tenant feels a proposed rent increase is too high then they can refer it to a rent assessment committee for review. The application must be made no later than the last day of the notice period given by the landlord or the increased rent will stand. If the committee consider the rent not acceptable (i.e. not a market rent), they'll adjust it. The committee's view is not always in the tenant's favour and may even deem the proposed rent too low. A year must elapse after the committee's decision before any new Section 13 increase can be issued.
There are different methods of bringing possession proceedings depending on whether the contract is an AST or Assured Tenancy and whether it is fixed term or periodic.
Please remember that every case is unique and this is just a guide to typical proceedings. It is also worth remembering that most tenants leave voluntarily and most landlords have a (relatively!) pain-free experience in gaining possession of the property and setting up a new agreement.
What if a fixed term AST is coming to an end and is to be continued?
The landlord and tenant can simply agree to a replacement fixed term AST
The landlord and tenant can agree to a contractual periodic tenancy instead (check with a lawyer whether you will need to re-register the deposit in the deposit protection scheme)
If the landlord and tenant do nothing, a statutory periodic tenancy comes into play. In this case, the terms of the AST remain unchanged but it becomes periodic rather than fixed term.
If tenants simply remain after the fixed term they do not become 'squatters'. They have a legal right to continue living in the property under the terms of their AST , unless you take the correct legal steps to remove them
What if a fixed term AST is coming to an end and the tenant wishes to leave?
He or she is generally entitled to leave at the end of a fixed term AST without giving notice
NB a clause in the agreement requiring a notice period may be unenforceable under the Unfair Terms in Consumer Contract Negotiations 1999
What if a fixed term AST is coming to an end and the landlord wishes to end the tenancy?
A landlord cannot just let the tenancy 'run out': if he or she does nothing, the tenant is legally allowed to stay on under a statutory periodic tenancy
The landlord can end the tenancy by providing 2 months' written notice. This is the Section 21 notice
NB the notice must not expire earlier than the fixed term of the notice
If the landlord has complied with these rules and the tenant refuses to leave, the landlord may start the process of eviction. A court order is required to forcibly remove a tenant
An accelerated possession procedure will grant this order in 6â€“8 weeks providing all of the correct steps have been taken (namely, proof of an AST and of appropriate notice have been supplied to the court)
This order cannot be granted in the first 6 months of tenancy
A Section 21 notice is not a legal form that must be filled in, rather the name given to the landlord's written notice for no-fault possession. You can make one yourself but you must be very careful in getting the dates correct or it will be invalid.
What if a tenant wishes to end a periodic AST ?
A tenant must provide a minimum of 4 weeks' notice
In most cases, the contract will specify at least a month's notice for a monthly rental and that notice should always expire at the end of a rental payment period.
If a tenant does ignore this notice requirement, it is generally not worthwhile for the landlord to chase him or her up on it. Switch your focus to finding a good new tenant!
What if the landlord wishes to end a periodic AST ?
If it is a contractual periodic AST, follow the stipulations which should be laid out in the contract. If in any doubt, take legal advice before proceeding
If it is a statutory periodic AST, the landlord must give at least 2 months written notice which expires on the last day of a rental payment period. For example, if a rent period runs from the 2nd of August to the 1st of September, the end of tenancy date stated in the notice must be the 1st of September
What if a tenant wishes to end a fixed term AST before the end of the term?
If you agree to the tenant's surrender of the property, this is a legally binding way to end the tenancy. You may want to agree to this if, say, the tenant has found a good replacement. Make sure any such agreements are written down
If there is a break clause in the agreement, the tenant may activate it
If you have are fundamentally in breach of your obligations, the tenant can legally end the tenancy (this is rare)
If you don't agree to end the agreement, the tenant must pay rent up until the end of the fixed period. If the tenant abandons the property early, you can obtain a court order to claim the rent owed to you
What if a landlord wishes to end a fixed term AST before the end of the term?
If the tenancy agreement has a provision for this, you should be able to seek possession.
Alternatively, you could activate the break clause in the agreement, if you have one, and then use a Section 21 notice(you cannot otherwise use the Section 21 notice if you are trying to end a tenancy during a fixed term)
If you can show you have grounds for possession, you can seek possession using a Section 8 notice. This can be a fairly knotty topic so these grounds will get their very own section...
If you try to evict the tenant yourself at any stage, you will be breaking the law. Leave it to the courts and the court-appointed bailiffs!
The Housing Act 1988 (as amended by the Housing Act 1996 ) lays down 17 grounds under which a landlord may successfully apply to court for possession. These apply to both AST s and assured tenancies.
Before we look at them, please note one overriding reason for repossession of the property which is not actually found in the grounds: If the landlord can show that the tenant has obviously abandoned the property or is no longer using it as their principal home, this should be sufficient to gain a court order for possession.
Grounds 1-8 are mandatory so if you can prove at least one of them in court, the judge must grant the repossession order. You are required to inform the tenant before the tenancy starts that possession might be sought on these grounds at a later date.
This can be used if the landlord once occupied the property as their only or principal dwelling, or intends to do so after the tenancy ends, and wishes to return. Written notice must have been given before the start of the tenancy
This relates to a mortgage lender's right to possession of the property in order to exercise a power of sale. The mortgage must have been taken out before the tenancy began. The tenant needs to have been informed of this in the agreement and notice must be given.
This can be used if the property has been a holiday let at any time in the preceding 12 months and is now being let under a fixed term of less than 8 months.
This applies to student accommodation owned by educational bodies.
This applies to property owned by religious bodies and which is now required by a minister to carry out his duties.
This can be used when the landlord wishes to carry out substantial building works or demolition. It cannot be used if the tenant was living in the property when the landlord bought it.
This allows the landlord to claim possession after the death of the tenant, whether rent was accepted or not, if the tenancy devolved under their will or was not a provision of any such will
This is for serious rent arrears and the conditions are quite specific. It can be used if at the date the Section 8 is served and at the date of the court hearing:
Grounds 9-17 are discretionary so if you can prove these allegations, the judge will only grant the order if he or she considers it reasonable.
This can be used if the landlord has offered suitable alternative accommodation for the tenant for when the proposed repossession takes effect. The tenancy must be on the same basis. The most common disagreement here will be over what is considered 'suitable' alternative accommodation
This is for any rent arrears not specified by Ground 8.
This can be used when there are persistent delays in lawfully due rent payment. Make sure you know the circumstances surrounding this before using it to issue a Section 8 notice: e.g. the courts will take it into account if the delayed payments are themselves the result of delays in the tenant receiving housing benefit
This is for when any obligations of the tenancy agreement, other than rent payments, have been breached
This can be used if the condition of the property has deteriorated beyond reasonable wear and tear due to waste by, or neglect or default of the tenant or anyone else residing there (e.g. the case of a sub-tenant where the tenant has not taken reasonable steps to remove them)
This can be used when a tenant, sub-tenant, lodger or visitor has been causing a nuisance to neighbours or has been convicted of using the property for illegal or immoral purposes. It also covers cases of domestic violence where one partner has left and is unlikely to return
This can be used when any of the furniture provided by the landlord has been ill-treated by the tenant or anyone else residing there (e.g. again, the case of a sub-tenant where the tenant has not taken reasonable steps to remove them).
This covers cases where the tenant was an employee of the landlord but has since left that employment.
This can be used when the tenancy has been created as a result of a false statement knowingly having been made by the tenant or someone acting on his behalf. This may have been done, for example, in the agreement itself or in any Tenancy Application Form. This ground again highlights the importance of keeping a record of the tenancy: you can get a comprehensive Tenancy Application Form from Rentify to make sure you are covered.
If the tenant wishes to end a periodic or fixed term assured tenancy, the same rules apply as for ending the equivalent AST .
What if the landlord wishes to end a fixed term assured tenancy?
The Section 21'no fault' procedure does not apply to assured tenancies and so the landlord will need to provide at least one of the 'Grounds for Possession' with the Section 8 notice.
What if the landlord wishes to end a periodic assured tenancy?
Again, you will need to provide sufficient grounds using the Section 8 notice.
So that's the meat of what's required of you, your tenant and your contract together. With that background we can now look at actually putting the thing together. And remember: Rentify will be here to help you every step of the way...
Landlords may draw up their own tenancy agreements but this is not at all advisable as there are complicated legal issues to take into account.
You may end up with a number of unenforceable conditions which may considerably weaken your position, to say nothing of any unfair and illegal conditions which may be inflicted on the tenant. Instead, use one of the <%= link_to 'excellent customisable agreements available from Rentify', tenancy_agreement_path %>.
Your tenancy agreement should always include the following:
The names of all people involved
The property's address
The start and end date of the tenancy
The amount of rent and how it's paid
The bills which each part is responsible for
Information on how and when the rent will be reviewed and guidelines for any increases
The deposit amount and how it will be protected
Under what circumstances the deposit can be fully or partly withheld (e.g. to fill in the sledgehammer-shaped hole in the wall)
Any tenant or landlord obligations
Whether the tenancy can be ended early and how this can be done
Who's responsible for minor repairs
The conditions surrounding the sub-let of the property
The Unfair Terms in Consumer Contracts Regulations 1999 applies to tenancy agreements. A term may be void and unenforceable in the following circumstances.
Clauses which attempt to exclude rights which the tenant would otherwise have under law will most likely be unenforceable (except in exceptional circumstances)
Clauses in which what the tenant can do hinges on the landlord's written consent will probably be unenforceable unless it is stated that the written consent cannot be unreasonably withheld
Any penalties or charges imposed by a clause will only be enforceable if they are reasonable and if they are reasonably incurred (i.e. you can't dish them out at the drop of a hat!)
If a certain term is found to be unfair it will be void and unenforceable. The rest of the contract will still stand.
If the tenant wishes to change the utility suppliers, have a clause stating they must notify you and supply you with the account number. You can then contact the utility provider easily at the end of the tenancy. Some tenancy agreements state that tenants must not change the utility suppliers during the tenancy. This could be considered an unfair term.
Reasonable re-letting costs can be charged, if a tenant wishes to end a fixed term tenancy. These and any other conditions attached to the landlord's agreement to accept the surrender should be recorded in writing before the surrender of the property
Seek advice if you are arranging a fixed term of more than 3 years as special procedures apply. Most tenancies have a fixed term of either six months or a year, but the fixed term can be of any length.
When setting up an AST, you should make it clear whether rent is payable in advance (normal) or in arrears (the exception). This ensures both parties will be clear on the rent periods, especially if the tenancy rolls over into a statutory periodic term. The importance of giving correct notice periods cannot be overstated
Specify a method of giving notice and stick to it: if the landlord does not follow the required method, his or her claim for possession could be struck out by the courts
Remember: tenants under an AST have a right to stay in the premises for a minimum period of six months, regardless of what is stated in the agreement
Think about putting in a clause asking the tenant to tell you whether or not they will be leaving. This will help you to make arrangements to check over the property and pay back any deposit
Make a note of when a tenancy is due to end and discuss in advance whether the tenant wants to extend or renew the agreement .