How to create a tenancy agreement
Paul Shamplina, the founder of Landlord Action, provides a step-by-step guide for landlords for creating a tenancy agreement.
- Written tenancy agreements
- Oral tenancy agreement
- Who does the tenancy agreement concern?
- What is a short term tenancy agreement?
- What are a landlord's obligations?
- What are a tenant's rights?
- What are the landlord repair responsibilities?
- Changing a tenancy agreement
- Ending a tenancy agreement
Written tenancy agreements
Getting the right type of tenancy agreement in place is vital in protecting the tenant, landlord and property. Most tenants will sign a written tenancy agreement, which is a legally binding document.
Before it's signed, a written tenancy agreement gives both parties the chance to read through the conditions of the tenancy thoroughly. There is also the opportunity to negotiate certain points, while landlords and letting agents can explain any clauses that may be confusing.
For landlords, a written tenancy agreement is vital just in case they need to regain possession of the property via a court order. Without an up-to-date, accurate and legal tenancy agreement in writing the process can be much more difficult.
Tenants also should be cautious of entering into an agreement with a landlord who doesn't want a written agreement. Well-constructed professionally written tenancy agreements often prevent unnecessary disputes from arising.
Oral tenancy agreement
Oral tenancy agreements are sometimes used when renting directly from a landlord – i.e. with no involvement from a letting agent. This is especially common when the landlord is letting their room or property to a friend.
Although verbal contracts are legally binding, they're very difficult to enforce because there is no way of proving what was agreed. When things go wrong, landlords and tenants with oral agreements have no clear outline of their responsibilities and obligations to which to refer.
Written tenancy agreements are strongly recommended over oral tenancy agreements. It's also worth checking with your insurer as it's often a requirement for landlord insurance that a written and signed agreement is in place.
Who does the tenancy agreement concern?
A tenancy agreement is a contract between a landlord and their tenant(s). It sets out the legal terms and conditions of a tenancy.
The most common form of tenancy is an assured shorthold tenancy (AST) and most new tenancies are automatically this type. An AST sets out the terms and conditions of letting the property for both the landlord and tenant. It lasts for a minimum of six months, but it can be written for 12 months with a six-month break clause.
The benefit to the landlord of an AST is that after the end of the fixed term, they then have the right to take the property back.
An AST sets out:
- contract details for the tenant and landlord.
- the rent agreed and the date it will be paid.
- deposit amount and how it will be protected.
- the time frame the property will be rented for.
- the rights and responsibilities of the landlord.
- the rights and responsibilities of the tenant.
- what happens on termination.
More information on short term tenancy agreements
A tenancy can be an AST if all of the following apply:
- the property rented is private.
- the tenancy started on or after 15 January 1989.
- the property is the tenant's main accommodation.
- the landlord doesn't live in the property.
A tenancy can't be an AST if:
- it began or was agreed before 15 January 1989.
- the rent is more than £100,000 a year.
- the rent is less than £250 a year (less than £1,000 in London).
- it's a business tenancy or tenancy of licensed premises.
- the property is a holiday let.
- the landlord is a local council.
For house and flat share agreements an AST is used, but in joint tenant names.
Additional clauses are needed to state that:
- the sharers are jointly and severally liable for payment of the whole rental amount.
- any damage to the property is paid for equally by all tenants whether responsible or not.
Where tenants don't know each other, perhaps a group of students or work colleagues, it's often advisable to give each their own tenancy agreement.
Excluded tenancy or renting a room
Tenants renting a room and sharing rooms, such as a kitchen and bathroom with their landlord, for example, usually do this 'under a licence'. It's similar to an AST but states which parts of the property are private to the landlord and tenant and which are communal. Tenants usually have less protection from eviction with this type of agreement.
What are a landlord's obligations?
Landlords have certain legal obligations that they must adhere to before and during a tenancy. At the start of a tenancy, landlords must provide tenants with the below information.
- An Energy Performance Certificate for the property.
- A gas safety certificate and also confirmation that smoke detector and carbon monoxide alarms are fitted and working.
- A copy of the government guide 'How to rent'.
- The landlord's full name and address or details of their lettings agent (who must provide the tenant the landlord's details if they ask for them).
Landlords are also responsible for:
- Protecting a tenant's deposit in one of the UK government-approved deposit protection schemes, which include Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme. Find out more about tenancy deposits.
- Making repairs to the structure and exterior of the property, heating and hot water systems, basins, sinks, baths and other sanitary-ware.
- The safety of gas and electrical appliances and installing smoke alarms on each floor of the property and carbon monoxide detectors in rooms with a coal fire or wood-burning stove.
- The fire safety of furniture and furnishings provided under the tenancy.
- Ensuring that the property is fit for habitation.
- Repairing and keeping in working order the room and water heating equipment.
- The common areas in multi-occupancy dwellings.
Landlords may require access to the property to inspect it and carry out repairs but they must give tenants at least 24 hours' notice. They must also visit at a reasonable time of day, unless it's an emergency and immediate access is required.
What are a tenant's rights?
Tenants have the following rights:
- To live in a property that's safe and in a good state of repair.
- To have their deposit protected in one of the government approved schemes and for it to be returned when the tenancy ends.
- To challenge excessively high charges.
- To know who their landlord is.
- To live in the property undisturbed.
- To see an Energy Performance Certificate for the property.
- To be protected from unfair eviction and unfair rent.
- To have a written agreement in place if they have a fixed-term tenancy of more than three years.
However, like landlords, tenants also have a number of responsibilities, such as:
- taking good care of the property.
- paying the agreed rent and bills (even if there is a dispute with a landlord).
- repairing any damage created by them.
- abiding by the terms of the tenancy agreement.
Tenants must also give their landlord access to the property to inspect it or carry out repairs. Landlords must give tenants at least 24 hours' notice and visit at a reasonable time of day, unless it's an emergency and they need immediate access.
What are the landlord repair responsibilities?
The landlord is required to keep the property in good repair throughout the tenancy. This is so the property remains up to the standard it was at the start of the agreement. However, "to keep in repair" doesn't mean the landlord has to make significant improvements to the property to suit the tenant.
Check out Kate Faulkner's article detailing landlord repair and maintenance responsibilities.
Changing a tenancy agreement
A tenancy agreement cannot usually be changed unless both parties agree to the changes.
If both parties agree, the change should be recorded in writing either by drawing up a new tenancy agreement or by amending the existing agreement. There are many reasons for changing or updating a tenancy agreement. These include:
- a landlord wishes to increase the rent.
- a landlord wishes to change the specific terms of the agreement, such as allowing a guide dog for a disabled tenant.
- the tenant wishes to transfer their tenancy to a member of their household who has lived with them for more than one year.
- the tenant wishes to share the responsibilities of the tenancy by having a joint tenancy.
Ending a tenancy agreement
The conditions for ending a tenancy agreement depend on the type of agreement in place and whether both parties agree.
Both parties agree - It's possible to end the agreement at any time if both parties agree. This is called "surrender". It's always best to put what has been agreed in writing so everyone knows where they stand and so that the landlord cannot be accused of unlawful eviction.
Fixed Term - This is usually six months or a year. A tenant has the right to leave on the last day of the fixed term without giving any notice. If they stay even one day over the fixed term, they will automatically become a periodic tenant and will have to give proper notice unless the landlord agrees to them leaving.
Many fixed term agreements contain a 'break clause', which allows a tenant to end the agreement before the fixed term runs out.
A landlord can end a tenancy at the end of the fixed term (usually six months) provided that the tenant has been given two months' written notice via a section 21 notice to quit.
Period Term - If the agreement is periodic (rolling from week to week or month to month), a tenant will normally have to give at least four weeks' notice to end it, or a calendar month if it's a monthly tenancy.
The notice must be in writing and must end on the first or last day of the tenancy, unless the tenancy agreement allows it to be ended on a different day.
Ending a tenancy early - A landlord can only end a tenancy before the fixed term is up if the tenant has breached the tenancy agreement. For instance, a tenant is more than two months behind on rent.
If this has happened, then the landlord must serve a section 8 notice to quit on the tenant. This would be followed by an application to a court for possession.
A tenancy agreement is one of the most important documents when renting a property. It sets out the terms under which tenants and landlords agree to let the property as well as all the legal rules that apply.
The document can then stand as a reference manual. If problems come about, both parties can then consult the tenancy agreement to find out their rights and respective obligations. It plays a vital part in preventing or settling disputes should they arise between landlord and tenant.