Research and reports
A written tenancy agreement makes things clear between you and your tenants, but which type of tenancy agreement is right for you? We run through some of the main options.
A tenancy agreement is a document that sets out the terms of a tenancy. When you’re renting out a property, having a written tenancy agreement is a good way of making sure that the rental conditions between you and your tenant are clear.
If you’re new to buy-to-let, choosing a tenancy agreement can be confusing. Our guide will help you get to grips with the different types of tenancy, so that you can pick the tenancy agreement that suits your situation best.
These are some of the types of tenancy you may come across:
Although this seems like a long list of tenancy types, the most common form of tenancy is the assured shorthold tenancy. Unless your property rental fulfils certain criteria, it’s likely that an assured shorthold tenancy agreement is the right one for you. But we’ll run through each tenancy type so that you can make sure.
Most tenancies are automatically ASTs. As long as the property is private (i.e. not commercial), the tenancy started after 1989, the property is the tenant’s main accommodation, and you (the landlord) don’t live in the property, it's likely to be rented on an assured shorthold tenancy.
Even if you’re renting individual rooms to tenants who share facilities, you can use an assured shorthold tenancy. However, if you’re charging extremely high rent (over £100k a year) or low or no rent, or if it’s a holiday rental, you can’t use an assured shorthold tenancy.
Most assured shorthold tenancy agreements will stipulate an initial fixed term of six or 12 months. You can’t raise the rent during this time unless the tenant agrees, or there’s a rent review clause in the contract.
You're required to protect the tenant’s deposit in a government-approved deposit protection scheme.
Once the fixed term is over, if you don’t sign a new contract with your tenant, the tenancy agreement automatically becomes ‘periodic’, moving to a monthly rolling contract with the same rent. We'll explain more on this below.
This type of tenancy can only be used in particular situations, where an assured shorthold tenancy can’t be used. This may be because the rent is less than £250 a year, the tenant has their main home elsewhere, or you live in the same property as your tenant (as long as you don’t share any facilities).
As this isn’t an assured shorthold tenancy, you don’t have to pay the deposit into a government-backed deposit protection scheme, and you don’t have to give a Section 21 or Section 8 notice to end the tenancy. However, the tenant has the right to stay in the property until the end of the fixed term, as long as they comply with the terms of the tenancy agreement.
If you live in the property with your tenant and share facilities (for example you have a lodger in your home), then this may count as an excluded tenancy.
Excluded tenancies don’t give the tenant as many protections as an assured shorthold tenancy. You don’t need to protect your tenant’s deposit in a government-approved deposit scheme, and you can usually evict the tenant without a court order and without giving four weeks’ notice, as long as you adhere to the tenancy agreement.
Read more: What is the rent a room scheme?
If you’re just beginning to rent out your property, you’re unlikely to opt for this type of tenancy.
Assured tenancies were more commonly used in the past: tenancies that began between 1989 and 1997 may be assured tenancies, and they give tenants long-term tenancy rights. Housing associations often rent properties on assured tenancies.
This is another one that you’re unlikely to use. It was a form of tenancy that was used before 1989, and it was a long-term tenancy, with tenants entitled to a fair rent set by the Valuation Office Agency.
If you’re renting your property to a company rather than an individual, the tenancy isn’t an assured shorthold tenancy. This means that it’s not governed by the same rules when it comes to things like deposit protection and eviction, and you can give a ‘notice to quit’ to end the tenancy, rather than serving a Section 21 or Section 8 notice.
A periodic tenancy is a type of tenancy without a fixed end date. This happens when a previous assured shorthold tenancy agreement comes to an end and another fixed term hasn’t been agreed.
This means the agreement switches to a rolling tenancy. The periodic tenancy notice is usually as long as one rental period, for example one month.
Opting for this type of agreement means you or the tenants can terminate the tenancy by giving notice.
To be more specific, it’s known as a ‘statutory periodic tenancy’ when the fixed term ends and the tenancy automatically changes to a rolling contract.
Meanwhile, a 'contractual periodic tenancy' is when it’s already agreed in the contract that the tenancy will switch from a fixed-term to a periodic tenancy after a certain amount of time.
As the name suggests, a fixed-term tenancy agreement lasts for an agreed amount of time. Tenants can’t move out early unless there’s a ‘break clause’ in your agreement or you as the landlord agree to ending the tenancy early.
Some fixed-term tenancy agreements might include a break clause. A break clause literally means a date in the agreement where it’s possible for the landlord or tenant to end the tenancy early.
For example, a break clause in a 12-month tenancy agreement might say it’s possible to end a tenancy after six months as long as the tenant gives one month's notice. Sometimes the landlord might agree to give two months’ notice if using this break clause.
Any more questions about tenancy types? Ask away in the comments.
The information given is this article is not legal advice, and if you need help with your buy-to-let property and your tenancy agreement, you should get guidance from a legal professional.
Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2023 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.