Types of Tenancy Agreements – Everything You Need to Know
You want to rent a place to live. But which types of tenancy will suit your circumstances best? There’s a lot of money, time and effort involved in arranging somewhere to rent. And it’s obviously really important to fully understand exactly what you’re getting into before you get into it! If you’d like to get to grips with a variety of different tenancy agreements, you’ve landed in the perfect place. Our comprehensive tenancy agreement guide provides everything you need to know to make a sensible, well-informed choice. Read on to find out everything you need to know when looking into a tenancy agreement in the UK, put nice and simply.
What are the different types of tenancy agreements
There are many different types of tenancy agreement, and unless you’re careful it can get confusing. The last thing you need is to make a bad decision. Luckily the fundamentals of all tenancy agreements are much the same. Regardless of the type of agreement, the paperwork represents a formal contract between you and the landlord. It doesn’t matter whether it’s a written or spoken agreement, both of you have serious rights and responsibilities to meet. Your tenancy agreement outlines the ways you can end the tenancy, and the reasons why your landlord can evict you. It lays out the right you have to ‘quiet enjoyment’ of the place. And it formalises which repairs and so on you’re responsible for. It’s your job to read your own tenant contract carefully before signing on the dotted line, and to ask the right questions when things aren’t 100% clear. Your tenancy agreement will either be fixed term or periodic.
Tenancy or Licence
So what’s the difference between a tenancy agreement and a licence? Residential occupancy is usually called a tenancy, while commercial occupancy is usually called a lease. That’s why there are residential tenancy agreements and business property leases. The difference relates to something called ‘exclusive possession’. Say the owner of the property lets you live in it as if it was your own, for one year, according to a set of rules. This is a tenancy. With a tenancy, the landlord loses most of their rights and the tenant loses none of theirs. If the property owner only lets you use the place on days they agree to, or while they’re not there, it’s a licence. When someone pays you for living in your house it’ll almost certainly be a tenancy rather than a licence. Unless you can prove it’s actually a license, the law will treat the agreement as a tenancy.
Assured shorthold tenancy (AST)
What is an assured shorthold tenancy or AST? Most private tenants have an assured shorthold tenancy, which means their original tenancy started on or after 28th February 1997, they don’t live with the landlord, and their rent is less than £100,000 a year or lower than £1000 a year for London, £250 a year elsewhere.
How about your tenancy rights? Under an assured tenancy the landlord can evict you without a reason as long as they follow the right procedure. An AST can run for a fixed term tenancy, usually 6 or 12 months, or it can be periodic, rolling weekly or monthly.
The landlord must give you all sorts of information in writing when you ask for it: your tenancy start date, the rent and the date it’s due, rent review clauses, and the length of your fixed term agreement. They must provide an up to date gas safety certificate and arrange an annual gas safety check. They must give you the building’s energy performance certificate. And if the agreement began or was renewed on or after 1st October 2015, they have to provide the latest ‘How to Rent’ guide. Weekly rentals must come with a rent book.
Your landlord is obliged to offer deposit protection, protecting your deposit in a government approved scheme. They have to carry out any repairs they’re responsible for. They can’t put up your rent during a fixed term unless you say it’s OK or your contract allows it, specifying when a rent increase can happen, your notice of termination of tenancy period, and the formula they’ve used to re-calculate the payments.
When your fixed term ends they can give you a month’s notice of a rent increase. If you want to stay, you agree to a new fixed term contract or stay there without a new contract, in which case your agreement turns periodic, rolling monthly at the same rent. And the notice to end tenancy? If you’re leaving you can simply end the tenancy by moving out and handing back the keys. If it’s a joint tenancy agreement you’ll have to talk things over with the other tenants.
It’s wise to be aware of the main differences between an assured tenancy agreement and an AST. So what is an assured tenancy? Assured tenancies are private, usually involving a Housing Association or Trust. Are you an assured tenant? Probably, if you moved in before 1997 and weren’t notified you had an AST, or were told you were an assured tenant in writing before the tenancy began. Maybe you had an assured tenancy with the same landlord just before your current tenancy, or the assured tenancy came to you when the regulated tenant died.
You can’t have an assured tenancy if it’s a business tenancy or you only pay a symbolic rent. If the tenancy started after 1st April 1990 and your rent is more than £100,000 a year, it can’t be assured. Renters of agricultural land or holdings, those living in student accommodation, and people in holiday homes can’t be assured tenants. Nor can those with a resident landlord.
An assured tenancy gives you the right to live in the property as long as you want to, but only if you pay your rent and abide by the agreement’s terms. If your landlord wants to evict you they have to give a very good reason in court and provide a Section 8 notice. And just like an AST, it gives you the right to decide who can enter the property, landlord included. They have to keep the property in good condition and ensure it’s safe. You have to carry out everyday maintenance and notify your landlord when something goes wrong.
You have some protection against rent increases, since your approval is necessary. While your landlord might suggest an increase, you’re allowed to challenge it and you can’t be evicted as long as you pay the rent during the challenge. Finally, you can pass on your assured tenancy to someone else. For example if your wife dies and the agreement is in her name, the tenancy can pass to you.
What is a starter tenancy? It’s a kind of AST which covers your first year as a tenant. It’s also called an assured short-hold tenancy, a short-term tenancy agreement that’s designed to last just 12 months. A starter tenancy is slightly different in that it offers new tenants a trial period. The idea is, it gets you off to a good start. It helps you stick to your tenant responsibilities, things like making sure you pay the rent on time and in full, letting the landlord in to make repairs, allowing people in to do safety checks and not causing problems. It gives your landlord stronger powers to handle tenancy agreement breaches, and provides a quick way for the landlord to end the tenancy if things go wrong.
Fixed term agreements
What are fixed term agreements or fixed term tenancies? Once you’ve come to the end of your starter tenancy, and all is well, the landlord may offer you a fixed term tenancy, also called an assured short-hold tenancy. Many landlords use a five year fixed-term tenancies, some issue two year fixed-term tenancies. It depends entirely on the circumstances. Bear in mind that a fixed-term tenancy isn’t the same as a lifetime tenancy, which comes without an end date. As a fixed term tenant you have some important rights, involving the right to swap your home, agree a joint tenancy, take in a lodger or let someone else take over the tenancy when you die, something called ‘succession’.
What is a periodic agreement or periodic tenancy agreement? It’s a rolling tenancy agreement, one that runs for a pre-agreed period of time, usually month to month but sometimes week to week or quarterly. It doesn’t end until one party gives notice. As a rolling contract it can be ended by you or your landlord through giving notice. These tenancies come with increased flexibility and less paperwork. A statutory periodic tenancy happens when an assured shorthold tenancy comes to the end of its fixed term and you stay there without renewing your contract. If you keep paying rent and the landlord is happy, your tenancy will continue on a periodic, rolling basis, and it happens automatically. Contractual Periodic Tenancy is different – it’s pre-agreed in your tenancy contract, not automatic, and can be agreed at the start of the tenancy or just before your fixed term contract ends. You can also set up a periodic tenancy from scratch by making your initial term a month or a week.
What is a regulated tenancy? If you pay rent to a private landlord and your tenancy started before 15th January 1989, it’ll be regulated. The same goes if you signed a new tenancy agreement after 15th January 1989 with the same landlord, whether or not it’s for the same property. If you’ve always lived in the same building as your landlord you won’t have a regulated tenancy, unless your home is in a purpose built block of flats. As a regulated tenant you pay a ‘fair’ rent that’s lower than the market rate, set by the Valuation Office Agency and the maximum your landlord can charge. If you need support paying you can claim Housing Benefit or Universal Credit. The landlord is responsible for most repairs and they have to keep everything in good condition. You can only be evicted when your landlord gets a court order, and they need a good legal reason for getting rid of you.
What is an excluded tenancy? These agreements are used for lodgers. Most tenancies in the private sector must obey the Protection from Eviction Act 1977, which means a landlord needs a court order if they want to repossess. Excluded agreements don’t have the same protections. The landlord can take possession without a court order by peacefully evicting you. This is most likely when you take in a lodger and you both live in the same property, sharing a kitchen, living room or bathroom. The hallway, landing and shared access to your own property don’t count as ‘shared’. This kind of tenancy isn’t suitable for any other circumstances.
What is a company let? It’s different from an AST. In law every company let is governed by the Law of Property Act instead of the various Housing Acts. This means you’re not legally classified as a consumer so you don’t get the same protection. A company let can’t be an assured shorthold tenancy, and Common Law applies. The rent is unregulated so the company can’t challenge it. If the landlord wants to put the rent up they need to do it via a rent review clause, or by everyone signing a new tenancy agreement. It’s easy for a landlord to end a common-law tenancy after the fixed term by providing a Notice to Quit. To end the tenancy during a fixed term, the landlord must prove the tenant has breached the agreement and use the traditional ‘forfeiture’ procedure.
Understand your tenancy agreement
You can see how being able to understand your landlord tenant agreement can make all the difference between a disastrous experience and an enjoyable life in a property you enjoy living in. As ever, knowledge is power. Now you know exactly what each type of agreement means, you can make a great decision. Happy house hunting!