The tenancy agreement is amongst the most important documents in a landlord’s business life.
This document governs the terms of your arrangement with a tenant. It is important that you fully understand its implications.
There are, however, several types of tenancy with which you might need to contend. The following is a brief rundown of the main differences between tenancy types.
Remember, you should seek independent legal advice before entering into a tenancy agreement.
Assured shorthold tenancy
AAn assured shorthold (AST) is the most common type of tenancy. New tenancies are, by default, ASTs.
ASTs were originally established in the Housing Act 1988. Most private tenancies begun on or after 15 January 1989 will be ASTs.
Under an AST the landlord can regain possession of the property at the end of a tenancy by using a Section 21 Notice to Quit, or during the course of the tenancy (provided certain conditions have been met) using a Section 8 Notice to Quit.
There are some circumstances in which an AST will not be permitted. For example, a tenancy may not be an AST if the rent is less than £250 a year (£1,000 in London), or more than £100,000. An AST is also not permitted if the tenant is not an individual (for example if they are a limited company), or if the landlord is resident in the property. In addition, in order for an AST to be applicable the property must be the primary residence of at least one of the tenants.
ASTs can either run for a fixed term, or indefinitely. See below for more information.
Assured tenancies are less common. The most significant difference between an AST and an assured tenancy is that an assured tenancy does not last for a specific length of time. Essentially, the tenant has the right to remain the property until you can prove in court that you have reasonable grounds for possession.
Unsurprisingly, assured tenancies tend not to be particularly popular amongst landlords. Some tenants, however, may ask for an assured tenancy if they want extra security.
Periodic vs fixed-term
It is also important to understand the difference between periodic and fixed-term tenancies. Most tenancies have a fixed term, for example of six or 12 months. Many people (both tenants and landlords) presume that once the term has been completed, the tenant is automatically required to leave. But this is not necessarily the case.
Generally, when a fixed term tenancy comes to an end, the law provides for the creation of a new, periodic tenancy. The tenancy will begin immediately, and will be as long as the period between rent payments. So, if the rent is paid monthly, the periodic tenancy will run from month to month. If it is paid weekly, it will run from week to week.
It is worth noting that tenants do not have to give notice if they intend to leave at the end of a fixed term tenancy. In a periodic tenancy, however, they will normally have to give notice equivalent to the period of the tenancy.
It is important to understand that the tenant enjoys certain rights regardless of the type of tenancy agreement.
Tenants enjoy a legal right to live in the property undisturbed. They are also entitled to expect that the property will be in a good state of repair. This means you will be required to carry out reasonable maintenance. In addition, tenants have legal protection from unfair rent and excessive charges.
A tenancy agreement is legally binding, and it is vitally important that you understand its terms before signing. If you are in any doubt about your rights or responsibilities, you should seek independent legal advice.