A Property Owner’s Guide To Tenancy Agreements

For landlords, writing a tenancy agreement is an essential document that needs careful consideration. There is no one-size-fits-all tenancy agreement template that is going to be suitable for every landlord to use. Instead, you need to create one that covers in detail everything from agreed rent payments to what you and your tenants will be responsible for concerning property maintenance and general upkeep.

While it makes sense to protect yourself with landlord insurance against the most common risks you face, such as protection against fire and flood, you need to make clear in your tenancy agreement exactly what responsibilities each of you holds, which can be tricky to get right.

Both you, as a landlord and your tenants, will enter into a tenancy agreement with certain expectations. However, any lack of clarity about what is expected of you and your tenants will strain your landlord-tenant relationship.

This is why setting out the rights and responsibilities of each party in a tenancy agreement form effectively makes the rules and expectations of a tenancy crystal clear.

What types of tenancy are there?

A tenancy agreement can be a written or verbal contract between a landlord and their tenant. The agreement sets out the terms and conditions of the tenancy, to which both parties agree. A third party must witness a verbal tenancy agreement to be effective, so creating a written tenancy agreement is the best way to ensure both parties are covered.

Once you have decided to rent out your property, your written tenancy agreement will help ensure that the conditions agreed upon between you are understood and fair for both parties.

There are different types of tenancy agreements you can enter into. The one you use will depend on what kind of property you plan to rent out and who you plan to rent to. The types include:

Assured shorthold tenancy

Assured shorthold tenancies are the most popular choice for UK landlords. They are mainly used when letting out residential properties to private residents. These are good for residential landlords because they give the landlord the right to take back their property once the tenancy agreement ends.

However, a landlord must provide their tenants with at least two months’ notice if they want to take back the property or evict their tenants. Having a shorthold tenancy agreement in place means landlords must place their tenant’s deposits in a government-approved deposit protection scheme.

Landlords cannot increase the rent during the initial fixed-term rental period without the tenant’s consent. But they can if they write a rental review clause in the tenancy agreement.

However, once the shorthold tenancy agreement finishes, the tenancy will automatically become periodic if the tenant stays on and doesn’t sign a new contract. This means the tenants will move into an ongoing monthly rolling contract and continue to pay the same rent.

Landlords can also use an assured shorthold tenancy when renting out individual rooms to tenants in their own homes and who share facilities.

Assured tenancy

Assured tenancies differ from assured shorthold tenancies because the landlord doesn’t have an automatic right to repossess their property after the tenancy agreement expires. Assured tenancies don’t give landlords security of tenure, and tenants have more protection against being evicted than if they were under an assured shorthold tenancy.

Landlords need to wait until the tenancy agreement is broken before they can claim their property back. For example, the tenant fails to pay their rent consecutively, which means the landlord can take out a possession order against their tenants.

Non-assured shorthold tenancy

Non-assured shorthold tenancies are used when it is impossible to use an assured shorthold tenancy agreement. This could be because the tenant you are letting to has a main home somewhere else, and they only rent your property for brief periods.

This type of tenancy can also be used when letting to close family or friends, the rent is less than £250 per year, or if you let out rooms in your home, but your tenants don’t share your facilities.

Excluded tenancy

Excluded tenancies are used by landlords that let out rooms in their homes and share facilities with their tenants. Landlords have no legal requirement to place their tenant’s deposits in government-approved deposit protection schemes under an excluded tenancy. But they have to provide their tenants with reasonable notice to quit.

Excluded tenancies can be set to weekly or monthly rental periods, so if the tenant agrees to pay weekly rent, the landlord is perfectly within their rights to issue one week’s notice to their tenants. Most excluded tenancy agreements are four weekly or monthly, so tenants will be given a month’s notice if they pay their rent monthly.

What should you include in a tenancy agreement?

It helps both tenant and landlord to understand their responsibilities when the tenancy agreement is well thought out and includes a set of essential information, including:

• If any bills such as council tax and utilities are included
• If other people can use the property, and if so, the specific rooms they can use
• If the landlord provides additional services, such as cleaning and maintenance of shared spaces, and whether there’s a charge for them
• The address of the property being let
• The names of tenants and landlords involved in the agreement and their contact details
• The notice period landlords and tenants must give when terminating the tenancy
• The rent agreed, including how much, frequency, due date and when it can be increased
• The start date and expected length of the tenancy
• If pets are allowed in the property

Landlords can create a tailored tenancy agreement to suit their individual needs and those of their tenants. However, there are implied terms that landlords are legally required to include in the tenancy agreement. These include:

• Landlords must carry out essential repairs, which include keeping the installations for the supply of water, electricity, sanitation, gas, heating and the heating of water in good working order
• Tenants are obligated to provide access to allow any repair work or property inspections
• Tenants have the right to live peacefully in the rental property without nuisance visits from landlords
• Tenants must respectfully use rental properties and not purposefully cause damage to fixtures and fittings

How do you end a tenancy?

A landlord can end a tenancy if the tenant has breached the tenancy agreement before the fixed term is up. The landlord must serve a section 8 notice to quit on the tenant. This will form part of the evidence that the court will need before granting a possession order. Once the section 8 notice is served, the landlord can apply to a court for possession of their property.

A section 8 notice states to the tenant that the landlord intends to seek possession of their property and on what grounds the possession is being sought. Without issuing this notice, the landlord will not be granted possession.

Conclusion

Landlords face several risks when planning to let out a rental property. This is why it makes sense to protect themselves with Landlords Insurance. Having the proper insurance in place will cover your costs should anything happen to your rental property, such as a devastating fire, flood, storm damage, or any other issues that can prevent your rental income from being paid.

By clearly defining the rights and responsibilities of both landlord and tenants, your tenancy agreement can help to keep you both on track and create a good landlord–tenant relationship from day one. Protect your business against unforeseen events and mitigate risks with our comprehensive business insurance coverage.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Brisco Business, part of the wider Henry Seymour Group.

All articles by Darragh Timlin