Tenancy agreements for landlords in England: what to include in your rental agreement
A robust tenancy agreement is the cornerstone of a successful tenancy. It protects both the landlord and the tenant, so although it is not a legal requirement, everyone benefits from having one in place.
What is a tenancy agreement?
A tenancy agreement is a binding contract between the tenant and the landlord. It sets out the legal terms and conditions of the tenancy – and any other expectations – clearly and without room for misinterpretation. It also explains what either party can do if the other doesn’t keep to their side of the agreement. Without having a tenancy agreement in place, there is no written record of the contract for either party, which can cause misunderstandings and put a strain on the landlord-tenant relationship, especially if expectations aren’t met.
Why do you need a residential tenancy agreement?
As we’ve already mentioned, although they are not legally required to be in writing, tenancy agreements are important as they are about protecting the legal rights of both parties. This sets everyone up for a good landlord-tenant relationship from the beginning as everything is clear. Here are some of the key reasons why you need a residential tenancy agreement:
- Most insurers insist on a rental agreement being in place before offering insurance
- The tenancy agreement details all the terms of the tenancy, which can include more but not less than the statutory/legal rights and responsibilities
- Disputes are more likely where an arrangement is only informal
- Accelerated eviction procedures can only be used where there is a written agreement
- Tenants on benefits will need a tenancy agreement for any claim
The Assured Shorthold Tenancy (AST)
The majority of private rented sector landlords in England will use an Assured Shorthold Tenancy (AST) as most meet the conditions below. This has recently changed in Wales, while Scotland uses Private Residential Tenancy agreements (see more on both below).
An agreement will be an AST where the following conditions are met:
- The rent is between £250 and £100,000 per year
- The tenants are people rather than an organisation such as a company
- The property will be the tenant’s main home
- The landlord does not live in the property
- The length of the tenancy is between six months and three years
GOV.UK has more detailed guidance on the criteria for ASTs. There are other types of tenancies, including excluded tenancies or licences, assured tenancies and regulated tenancies, but these are far less common than ASTs. Shelter provides information on the different types of private tenancies.
Currently, a tenancy in England can either be:
- fixed-term (running for a set period of time)
- periodic (running on a week-by-week or month-by-month basis)
Under the Renters’ Reform Bill there are proposals to move to a system of periodic tenancies – rather than fixed term – in England. Both landlords and agents should make sure they are prepared for the changes when they come and we will keep you updated.
Types of tenancy agreements
The Government has created a generic model tenancy agreement for ASTs, for use when a landlord and tenant are entering into an AST agreement in the private rented sector. There is no legal requirement to use it and landlords who do plan to use the model agreement are encouraged to also see the Government’s how to rent guide.
There are other tenancy agreement templates available, but if you do choose to use one, make sure it is from a trusted source, or you may prefer to take legal advice to be on the safe side – AST agreements can be written to reflect the varying and more specific circumstances of tenants, providing more flexibility for landlords and agents although statutory rights cannot be overridden.
Landlord Action, part of the HFIS group, offers a tenancy document drafting service and can help self-managing landlords tailor their tenancy agreements, either through their checking service or by drafting the agreement in line with the landlord’s specific requirements.
For agents who would like advice drafting tenancy agreements, premium members of HF Assist, the letting agent helpline, benefit from access to dedicated legal expertise, as well as a resources library containing an extensive range of useful documents and templates, and a tenancy review system.
Examples of tenancy agreements:
Tenancy agreements for certain kinds of properties, for example houses in multiple occupation (HMOs), may have different requirements. In these cases, the agreement can be adjusted for things like how many people are going to be renting the property, and the relationships between them. Here are some examples of tenancy agreements.
- AST for a family or two people who are unrelated: This is for use when renting out the entire property to a family or a couple of friends on one joint tenancy. In this type of tenancy agreement every adult is equally responsible for meeting the terms of the agreement including paying the rent. It is designed to be used with or without a security deposit.
- Joint AST for a group of sharers: This agreement is for use with houses in multiple occupation (HMOs) – when renting a property to three or more people where at least two of them are unrelated to each other. These types of arrangements have their own specific requirements which the tenancy agreement covers. There is a separate ‘sharer agreement’ for four or more sharers who are not related to each other.
Tip: For landlords with larger HMOs (four or more tenants), it is best to let using the standard ‘room-only ‘AST as it allows easier access to the communal areas of the property in order to comply with HMO requirements such as fire safety.
- Standard room-only AST: This agreement is intended for landlords who are renting out a property to three or more people – at least two of whom are unrelated – and need to comply with stricter HMO regulations. The best way to do this is through a ‘room-only’ agreement so that inspections of the communal areas of the property can be carried out whenever you need.
Ending a tenancy agreement early
One way you can end a tenancy early without including a ‘break clause’, is if the tenant has broken the terms of the tenancy agreement. Typical examples of a breach of the tenancy agreement include falling behind on monthly rent payments, malicious damage to the property or inappropriate behaviour towards other residents. The other way is by mutual agreement where you come to an arrangement that suits all parties, even if there is no break clause.
What is a break clause in a tenancy agreement?
As mentioned earlier, the break clause allows either the tenant or the landlord to end the tenancy early, provided that sufficient written notice has been served. There is no standard format for a break clause, but usually it can only be used on or after a specified date. For example a break clause might say the tenant can end the tenancy six months after it starts if they give one month’s notice. It is important that the break clause is clear – the exact notice period, the terms of the break clause and how it can be activated must all be included in the tenancy agreement.
What happens when the tenancy agreement ends?
Even if the tenancy has run its course and is ending in line with the dates in the tenancy agreement, it is still a good idea that the landlord and the tenant communicate with one another to confirm that the tenancy is ending, to avoid any misunderstandings.
If the tenancy ends, with no new fixed term having been agreed and the tenant is still in the property, then a ‘periodic tenancy’ comes into effect. This is a rolling tenancy with no fixed end date, which usually runs from month to month – in line with the terms in the original agreement. The statutory notice for ending a periodic tenancy remains unchanged and the terms and conditions of the periodic tenancy remain the same and can continue indefinitely. However, the landlord can now repossess the property once the correct written notice has been provided.
The proposals put forward by the Government in the Renters’ Reform Bill, aim to move all tenants on ASTs to a ‘single system of periodic tenancies’, which means that tenants will need to give two months’ notice if they wish to leave. Under the Bill, Section 21 will also be abolished but landlords wishing to repossess their property will be able to use the strengthened Section 8 grounds instead
In summary
The tenancy agreement is a legal contract between you and the tenant, so it is important to take it seriously and make sure it is right for you. With a clear tenancy agreement in place, all parties understand the expectations of them during their tenancy. This reduces the chance of misunderstandings, contributing to a more transparent relationship between landlord and tenant, and ultimately helping to protect your investment.
