Advice for landlords on the best form of tenancy agreement

There are many different types of tenancies. Choosing the wrong tenancy could result in you being bound by terms that do not reflect your initial intentions. In this article we will cover different types of tenancies and important points to consider for private landlords willing to rent their properties to private tenants.

Which tenancy should I use?

There are 3 main types of tenancies in England and Wales.

Assured Shorthold Tenancy (AST)

The most common form of tenancy is an AST tenancy. ASTs are most commonly applicable in the case of the following:

  • private dwellings;
  • tenancies started on or after 15 January 1989;
  • properties that are tenants’ main residencies;
  • properties that are not occupied by the tenant and live-in landlord.

AST tenancies cannot be created in respect of:

  • tenancies that started or were agreed before 15 January 1989;
  • the rent is more than £100,000;
  • the property is rent free
  • the rent is less than £250 per annum (less than £1,000 for London);
  • it is a business tenancy or tenancy of licensed premises;
  • the property is a holiday property;
  • the landlord is a local authority.

Assured tenancies

Assured tenancies provide tenants with more rights to occupy the property. Tenant cannot be normally removed without a ground for possession being demonstrated by the landlord to the court.

There are both mandatory grounds for possession under which the court must grant possession and discretionary grounds. You can find the full list of grounds for possession here.

Regulated tenancies

Most lettings by private landlords which started before 15 January 1989 are regulated tenancies under the Rent Acts (see page 6), unless the landlord and tenant live in the same house. Nowadays, regulated tenancies can be created in very limited circumstances. Regulated tenancies give tenants extensive rights and protection from eviction. They also entitle tenants to apply for a fair rent to registration against the property. If successful the landlord cannot charge the tenant more than the amount set as fair by a rent officer.

I am a live in landlord and want to rent out a room in my house. What should I do?

There are no formal statutory rules governing lodgers. You should use your own lodger agreement in which you should reflect terms of your agreement with the lodger.You should in particular cover issues associated with rent, deposit, payment dates and method as well as house rules and notice for termination. The most convenient and easiest form of collecting rent is through Direct Debit. Also be careful about who you are letting the room to and try to obtain as much information about any potential lodgers.

Lodger Agreement

Lodger agreement is effectively a ‘license agreement’. Under lodger agreement the lodger does not have exclusive occupation rights. A number of provisions that apply to ASTs do not apply to lodger agreement. For instance, the deposits need to not be deposited under the secure deposit scheme and no possession order has to be sought from the court to remove the lodger. Lodger agreements can also be used for landlord who do not share the property with lodger. For this to happen the landlord needs to provide at least one service such as cleaning. Nonetheless, if you do not physically share accommodation with the lodger you will need to obtain a court order to regain full possession of the property.

Importantly, if the lodger has entirely self-contained room and effectively does not share accommodation with you the relationship between you and the lodger will likely to be governed by common law resident landlord tenancy rules.

I rent out rooms in my property to different tenants but I do not live in the property myself. What is the most suitable form of tenancy?

It largely depends on your contractual arrangements with existing tenants. Typically, the best way is assured shorthold tenancy agreement with all tenants. The agreement should impose both individual and joint liability. If all existing tenants have their own agreements you should use the AST agreement with the new tenant individually as well.

What should I remember about when signing a tenancy agreement?

When signing a tenancy agreement always remember about the following points:

  • Name of the tenant (make sure you use their real name as it is on his or hers ID);
  • Remember to include your name and address;
  • The agreement should start when the tenant moves in;
  • Clearly identify the room (if the property is shared with others);
  • Clearly set out the amount of rent, payment method and date of collection;
  • Clearly state the amount of deposit (usually one months’ rent);
  • Make an inventory and take pictures of the room/property with the tenant present (you should attach this to both agreements as a schedule. This will ensure that no disputes arise in relation to state and maintenance of the property.
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May 20, 2012