Tenancy agreements: read this guide before you write yours - Total Landlord Insurance

July 2, 2020
Total Landlord Insurance
Tenancy agreements: read this guide before you write yours - Total Landlord Insurance

We’re serious about tenancy agreements. In fact, we don’t offer landlord insurance to people without them*.

A residential tenancy agreement is a contract between you and your tenant(s). It sets out, clearly and without room for misinterpretation, what is expected of the landlord and the tenant, and the length of the agreement between both parties. It also explains what they can do if the other person doesn’t uphold their agreement.

Without one in place, landlords and tenants have no written record of their contract. This leaves them with fewer legal options if a dispute occurs. Rental agreements are about protecting the legal rights of both parties and everyone benefits from having one in place.

That said, there’s sometimes confusion around what should be included and which type of agreement is best to use. In this post, we’ll clear up a few of these questions and explain where you can find a template you can trust.

What is an Assured Shorthold Tenancy?

The majority of private rented sector (PRS) landlords will use an Assured Shorthold Tenancy (AST), which is the default legal category of residential tenancy in England (Wales is changing to this soon, while Scotland uses Private Residential Tenancy agreements).

There are other kinds of tenancies, but since the majority are ASTs we’ll focus this article on them. Certain kinds of properties, such as HMOs, may also have different tenancy agreement requirements.

The basic principle is that, provided the tenant complies with the terms of the contract, their tenancy is protected for the agreed period. Once this period is over, the landlord is entitled to get their property back.

ASTs can only be used by private landlords or housing associations and the landlord can’t live in the property that they’re renting. The rent has to be above £250 a year and below £100,000. GOV.UK has more detailed information on the criteria for ASTs on their website.

What does a tenancy agreement need to include?

If you’re planning to create a tenancy, your rental agreement should capture, in plain and unambiguous language:

  • The names and contact details of the property owner and tenant(s)
  • The type of tenancy they’re agreeing to
  • The amount of rent to be paid and how often tenants will pay rent
  • The total tenancy deposit to be paid and how that money will be protected – all landlords are required by law to use a tenancy deposit protection scheme if they take a cash deposit. Many landlords are now opting to use a deposit replacement scheme and it is important to  tell your tenants which type of scheme is being used and include this within the tenancy agreement
  • The period of time the agreement will stand for and any break clauses
  • The rights and responsibilities of the landlord and tenant(s) – you can find more on this below
  • The criteria for ending the tenancy
  • The period of time the agreement stands for

How detailed does a tenancy agreement need to be?

As a general principle, you should be as specific as possible about everything you want the tenant to know or do. This may include:

  • Who is responsible for the garden
  • Where tenants are allowed to smoke
  • If pets are allowed (the new model tenancy agreement has been updated to prevent a ‘no pets’ blanket ban)
  • How to manage damp, mould and condensation
  • The repairs that you will be responsible for (such as structural repairs and utilities like gas and hot water) and the repairs your tenant will be responsible for (such as damage to appliances or accidental damage to the property)
  • How often inspections to the property and appliances such as the boiler will occur and how notice will be provided

What happens when your agreement runs out?

Most new ASTs last for six months to a year. You can choose to offer one for as little or as much time as you want, although this is considered unwise, unless you add in a break clause.

Six months to a year gives landlords the flexibility to take back possession using a Section 21 notice within a reasonable timeframe should they need to.

When the fixed term of the AST runs out, and the tenant remains in the property without a new or renewed contract, a periodic tenancy will take effect.

The terms and conditions for the periodic tenancy remain the same and can continue indefinitely. However, the landlord can now regain possession of the property once the correct written notice has been provided.

Where can you find a reliable tenancy agreement template?

If you do choose to use a template, make sure it is from a trusted source, like GOV.UK.

Some landlords may choose to adapt or add clauses to tailor it to their property. If you are adding your own clauses, you may wish to seek legal advice.

Added clauses that are not legally enforceable or considered fair may land you in trouble under Unfair Contract Terms legislation.

If you’re looking for help, our partner eviction and housing law specialists, Landlord Action can assist with writing and reviewing tenancy agreements. They offer two packages for landlords.

  1. You draft the AST yourself and Landlord Action review and offer suggestions where necessary
  2. You tell Landlord Action your requirements and they draft the document for you

You can find more information on both of these services on their website.

Can you change your rental agreement?

Your agreement is a legal contract, which means it can’t be changed without the tenant and property owner agreeing to those changes and signing an updated contract or making written changes to the existing one.

Generally, signing a new contract is considered better as there’s less room for misinterpretation.

Can you end your agreement early?

There are a few reasons you may want to terminate your contract early.

The simplest of these is that both parties agree to end it early, for whatever reason. If this happens, it’s best to capture in writing at the time what the reason was and that both parties are OK with ‘surrendering’ their agreement.

A ‘break clause’ allows the landlord or the tenant to end the tenancy early provided that sufficient written notice has been served beyond a given date.

For a 12-month contract, a break clause of six months may be included. The exact notice period, the terms of the break clause and how it can be activated must all be included in the tenancy agreement.

The only way you can end a tenancy early without a break clause is if the tenant has breached the terms of the tenancy agreement.

Typical examples include falling behind on monthly rent payments, intentional damage to the property or inappropriate behaviour towards other residents. The landlord will initiate this termination by providing written notice via a Section 8 notice.

Even if the tenancy has run its course and is ending according to the dates in the agreement, it’s still recommended that either the tenant or landlord provide notice that the tenancy is ending. This helps avoid any misunderstandings or assumptions.

Take your contracts seriously

When it comes to legal documents, it’s always better to be safe than sorry. Understanding the rights and responsibilities of both parties and how the tenancy agreement supports those things is important.

If you don’t take these things seriously, you can end up with fewer legal options in the event of a dispute over damage to the property, tenancy deposits or monthly rent payments being late.

A legal and binding contract is a great starting point, but for total peace of mind, you want to know that you’re covered for any eventuality

Total Landlord Insurance offers comprehensive buy to let cover at a reasonable price.

*As we mentioned earlier, we can only provide you with landlord insurance if you have an Assured, Assured Shorthold or Regulated Tenancy Agreement (England and Wales) or Short Assured or Assured Shorthold Tenancy Agreement (Scotland) in place.

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