Different types of tenancy: which Tyep of agreement is best for me?
Introduction
This article is useful reading for all landlords and tenants.
There are three main types of residential tenancy. Which you choose will depend on what you want from the tenancy – you then select the agreement appropriate to the lawwhich applies.Simply, the best option is to choose an assured shorthold tenancy unless the purpose for which you want the tenancy is excluded (as listed below). The main three types are:
Assured Shorthold Tenancy (AST) – agreement used for most standard lettings;
Non-assured Tenancy – generally used where AST does not apply;
Company Letting Agreement – used when tenant is a company
Assured Tenancy and Assured Shorthold Tenancy Assured Tenancies and Assured Shorthold Tenancies (ASTs) are very similar. There are only small differences between the two, primarily to do with the length of the tenancy and the protection granted to the tenant.
The main features of ASTs:
The tenancy is for a fixed term - usually between six months and 3 years;
The tenant has exclusive occupation of all or part of the property;
The landlord may charge a market rent;
The landlord can recover possession only for the specific grounds laid down in the Housing Act 1988;
Special rules apply as to the notice to be served to determine a tenancy.
Our suggestion is to choose the shorthold version if the tenancy is for a fixed period of time between 6 months and 3 years. If it is for any longer, choose an assured tenancy.
The grounds for possession (set out in the 1988 Housing Act) of an assured tenancy are stricter and less favourable to the landlord than the requirements for obtaining possession of an AST.
Company letting agreement Assured tenancies and assured shorthold tenancies can be granted only to individuals, so if you are granting a tenancy to a company or organisation, the law relating to tenant protection does not apply. The terms may therefore be agreed “commercially” without reference to the Housing Act or any other tenant protection. (Though you still may not evict a residential occupier without an order of the court)
Which Agreement should I use? Use an assured shorthold tenancy unless the tenancy is of the type excluded under the Housing Act 1988 (Section 1, and Schedule 1, as amended). Below is a list of those excluded:
A tenancy granted to a company or an organisation (e.g. tenant is a housing association or a limited company). Assured and assured shorthold tenancies may only be granted to an individual or in the case of a joint tenancy, joint tenants where the tenants are individuals. (Housing Act 1988, s.1);
A tenancy granted by a resident landlord. A resident landlord is defined as one who continuously lives in the same property as his tenant. A landlord living in a separate flat or house converted into flats in which his tenant(s) live(s) may be a resident landlord. A landlord living in a separate flat in the same purpose-built block of flats as his tenant is not a resident landlord;
A business tenancy subject to Part II of the Landlord and Tenant Act 1954;
A tenancy allowing the tenant to occupy the property for a holiday;
A tenancy of a property let together with more than two acres of agricultural land. Agricultural land is land used as arable, meadow, pasture, woodland, poultry farming, orchard or as a market garden. Such agricultural land does not include land occupied with a house as a park, or as grounds used mainly for sport or recreation. It may be safely assumed that the land is agricultural for the purposes of the Housing Act 1988 if it has been rated for council tax purposes as agricultural (Local Government Finance Act 1988);
A tenancy of an agricultural holding;
A tenancy granted by an educational body specified within a list issued by the Secretary of State to a student studying at that same institution;
A tenancy in which the landlord is the Crown or a Government Department;
Protected tenancies under the Rent Act 1977 or the Rent (Agriculture) Act 1976;
A tenancy entered into before 15 January 1989, or arising as a result of a contract entered into before then;
A tenancy of a licensed premises;
A tenancy where the landlord is a local authority, a housing action trust, certain specified statutory bodies or a fully mutual housing association (unless they are old style assured tenancies that have been converted);
A tenancy which is rent-free or where the annual rent is less than two thirds the rateable value of the property;
A tenancy of a property at a high rent.With the introduction of council tax, the Act was amended in 1990, Schedule 1, Section 1, Para 2(1)(b), such that tenancies with an annual rent exceeding £25,000 are now excluded;
A tenancy will not be an assured tenancy if it falls within any of these exceptions or if it fails to meet the definition of an Assured tenancy in the Housing Act 1988. For example, if it is not let as a separate dwelling, or if the tenant does not occupy it as his only or main residence.
If the tenancy is one of the types listed above, it will generally operate as a non assured tenancy. In the case of a company letting, we recommend that you use a Company Letting Agreement. In other common law tenancy situations, a General Tenancy Agreement will normally suffice.
If you are unclear as to what tenancy agreement you should use in your own particular circumstances, please contact us at here.
If by chance you find some error of law or fact in any Net Lawman information page, do please tell us. We should also welcome your suggestions for new subjects for information pages. These notes:
Do not provide a complete or authoritative statement of the law;
Do not constitute legal advice by Net Lawman;
Do not create a contractual relationship;
Do not form part of any other advice, whether paid or free.
