Once you have satisfactory references you can grant a tenancy. This will involve a legal agreement between you and the tenant in the form of a Tenancy Agreement. Landlords should be aware of the benefits of written tenancy agreements and the procedures necessary for obtaining such an agreement.
Generally, it is most inadvisable to hand over the keys to a property unless your tenants have signed a form of tenancy agreement.
New private rented tenancies will normally be an Assured Shorthold Tenancy (AST). Shorthold tenancies allow landlords to let their properties for a short period only and to get it back (if they wish) after 6 months. There are some exceptions e.g. where the landlord also lives in the property. Most fixed term agreements are for 6 or 12 months.
When creating a tenancy shorter than 6 months you must be aware that the courts cannot order possession to take effect within 6 months of the start of tenancy.
Other types of agreements you may come across would include assured tenancies regulated or protected tenancies or unprotected tenancy. Special rules apply for those situations where the landlord and tenant live in the same property. In some situations where accommodation is shared a licence may be created. Individual advice may need to be obtained about those situations.
Where a tenant has an assured (non-shorthold) tenancy the biggest difference is that a landlord cannot use a section 21 notice to end the tenancy. This type of tenancy can only be ended if the landlord can provide evidence that the tenant is in breach of their original agreement. It is worth noting that if a tenant has an assured tenancy, even if they agree to sign a new tenancy agreement called an assured shorthold tenancy agreement this does not revoke their rights under their original assured agreement.
Annual Rental Threshold for Assured Shorthold Tenancies
From the 1 October 2010 the annual rented threshold for Assured Shorthold Tenancies (AST) rose from £25,000 to £100,000. This measure is retrospective and could mean that existing tenancies that had not previously fallen under the Housing Act 1988 now will.
Landlords will also need to comply with the full legal framework associated with assured shorthold tenancies. This includes having the option of using accelerated Court procedures for possession. They will also be able to use ‘off-the-shelf’ tenancy agreements. In addition, they will have to follow the procedures in the Housing Act 1988 when proposing rent increases.
Landlords with existing common law tenancies which will become assured shorthold tenancies will not need to protect their tenants’ deposits in a recognised scheme immediately, although we would recommend that it is good practice to do so. They will, however, need to protect the deposit if the tenancy is renewed on or after 1 October 2010 or if a new deposit is taken.
We recommend that you seek specialist advice on this issue if you think you may be affected.
Tenant’s Right to a Written Statement
A tenant who does not have a written agreement has a right to ask for a written statement of any of the following main terms of the tenancy:
- The date the tenancy began;
- The amount of rent payable and the dates on which it should be paid.
- Any rent review arrangements;
- The length of any fixed term which has been agreed.
The tenant must request the statement from the landlord in writing. You must provide it within 28 days of receiving the request. Failure to do this without a reasonable excuse is a criminal offence for which you can be prosecuted and, if found guilty, fined.
Implications of Oral Agreements
There is no legal reason why a tenancy can’t be created verbally. If a tenant moves into a property and starts paying you rent this will be a tenancy even if there is no written agreement.
It is not possible to allow the tenant to live in the property ‘on approval’ on the basis that you will give them a tenancy later. If they have exclusive occupation of the property and pay rent, they are automatically a tenant and will be entitled to statutory protection provided to tenants under the law.
Written Tenancy Agreements
Landlords can draw up their own agreements, but this is not advisable. Drafting tenancy agreements is a highly skilled job and if you do this without legal advice you may find that you have made you position worse in the very areas where you were seeking to protect your position.
It is better to use one of the many excellent standard tenancy agreements which are available from landlord associations, law stationers, the larger general stationery stores or online services for landlords. If you need to alter a standard tenancy agreement you should seek specialist advice rather than doing it yourself. In addition, many local authorities offer services to help landlords. The Private Rented Service Newcastle offers tenancy agreements and a sign-up service for landlords with properties in Newcastle upon Tyne.
Prospective tenants should be given every opportunity to read and understand terms of the tenancy, and any other agreement, before becoming bound by them.
Extra Clauses
If you wish to put in extra clauses these must not breach housing law or provide unfair advantage to one party over the other (usually in favour of the landlord). Such clauses would be considered ‘unfair tenancy terms’ and would not be enforceable.
Periodic tenancies
Remember at the end of a fixed term you need to end the tenancy correctly by serving the proper notice. If you don’t the tenant has a right to remain in the property.
The tenancy would then become periodic which means it runs from one rental period to another. The terms of the tenancy remain as they were in the original agreement unless formally changed by, for example, agreeing a rent increase.
Breaches in the Tenancy Agreement
A breach of the Tenancy Agreement is when the landlord or tenant fails to fulfil an obligation in the agreement. Action can be taken against a person when a breach occurs.
Breaches can include rent arrears, antisocial behaviour and damage to the property or furniture provided.
As a general principle when an agreement is signed, even if you have not read it, you are bound by the terms of the agreement. However, the Unfair Terms in Consumer Contracts Regulations apply to tenancy contracts meaning some clauses may be unenforceable. In most circumstances neither a tenant or a landlord can unilaterally cancel the agreement once it is signed in most circumstances. You should seek advice if this occurs.