Types of tenancy and tenant
Background
In the 1950s the actions of a notorious landlord prompted the government to start what has evolved into today's regulatory background. Residential letting became enormously complicated until the Housing Act 1988 sidestepped some of the earlier legislation by providing that landlords could create a new tenancy "animal" to which the older legislation would not apply. That act now contains most of the relevant legislation. The Housing Act 1996 further simplified the procedures. The position today is that the legislative environment can now reasonably be said to be fair to both landlord and tenant. We will not dwell on old law, but note that a tenancy granted before 15th January 1989 is regulated partly by the Rent Act 1977 and different law applies. Tenancies today
Almost all new tenancies are Assured Shorthold Tenancies ("ASTs"), the main features of which are:
- 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.
Other tenancies
Yet another set of rules applies to farm tenancies, which are not covered in these notes. Categories of tenancy to which the rules do not apply are holiday lettings and lettings to companies for their staff. Net Lawman provides document templates for all these except agricultural tenancies. Note that if you let a holiday home for someone to live in for a while, that is a residential tenancy, not a holiday letting. What about licenses?
For some years the grant of a license to occupy was considered to be a way to avoid granting security of tenure to a tenant. Today, the terms of certain residential occupations are still best expressed as a license rather than a lease. Briefly, an occupation of shared accommodation (such as a lodger in your home) may best be treated as a license, but accommodation shared by a number of strangers is best handled as a lease to all of them together.
Buying a house, ready occupied
Net Lawman advice is "Don't, unless you are an experienced landlord". It may seem attractive to have an immediate rent flow. Your bank manager might approve a loan. But you can buy all sorts of problems, which may not have been apparent even to your conveyance solicitor. If you must, then check carefully:
- Financial viability of tenants and whether they have paid promptly in the past;
- Whether there is a strong guarantor;
- Quality, type and terms of tenancy agreements;
- Condition of property, particularly installations for gas, electricity and water;
- If student accommodation, whether it has passed the university registration requirements.
Background matters
Here are some background matters which may affect your decisions but which do not necessarily impinge on the terms of the tenancy agreement:
Why use a written agreement?
Here are reasons why a written agreement is advantageous:
- The tenant signs to the promises contained in the agreement;
- Both sides have a clear record of what is agreed;
- A landlord has a legal obligation to provide written details of the main terms of the agreement within six months of the start of the tenancy in any event;
- If it becomes necessary to evict a tenant, the landlord cannot use the "accelerated possession" procedure unless the tenancy agreement is in writing.
And remember that once a tenant is in occupation, you cannot force him to sign an agreement. The tenancy already exists. It is therefore essential that the agreement is signed in advance for occupation. Personal information and references first
A very useful safeguard against fraud is to obtain basic personal information from a prospective tenant out the outset. If it later transpires that the information was given fraudulently or negligently, that may be adequate ground for an order for possession. Check out references thoroughly. Make sure they are arms length. Use the telephone, not just a letter. Ask specifically "How late was the rent paid?" If you have real doubts, say no and advertise again. Tenants receiving social security payments
We will readily admit that some fortunes have been made by landlords letting property to tenants on social security. The key element is that it has to be a business. Multi-let property may go hand-in-hand. You need to be a property professional for that too. This web site, and the template agreements we sell, are designed for use in "regular private letting situations. Fixed term or periodic tenancy
It is usual for a tenancy agreement to be expressed as for a specific term. This provides contractual certainty to both parties. However, when the fixed term expires, the tenancy continues. The tenant may continue in occupation. This period of continued occupation is referred to as a "periodic tenancy". If the period between rent payments was one week, then it is a "weekly periodic tenancy". If the period was one month, of course, it is a "monthly periodic tenancy". The first day of the period is the day after the last day of the fixed term. A periodic tenancy will continue until either the tenant leaves or the landlord serves a notice and obtains a court order. For details, see below, "evicting tenant in breach". Guarantor?
It is a good idea always to obtain a guarantee from a third party if you are in any doubt as to whether the tenant has the means to pay. This will arise in many cases where there is a single tenant and in most cases where the tenants are students. Parental guarantees are usual. If the tenant or guarantor is not a householder, then obtain proof of his financial substance. Most Net Lawman leases and tenancy agreements provide for a guarantor. A further safeguard against an absconding tenant is to obtain a parental address, even if the parent is not guaranteeing the payment. The address given when the lease is signed is by definition, an old address!
One house - one tenancy
Assuming you wish to avoid the many problems of multi-let buildings (more than four people), you will consider whether to let to each of four people separately or together. The advantages of letting to a group of people together far outweigh the ease of finding just a single tenant. By letting to a number of tenants under one agreement, the landlord can take advantage of "joint and several" liability. That means that each individual is responsible for the whole of the money due and obligations under the lease. Of course it is important that your tenants understand this, because they will then take more care over your house and who they invite to join them if one should leave.
New tenant joins
If one of several tenants leaves your house, all, including the one departed, are still liable for the rent. However, it is frequently the case that those remaining will wish to replace the person leaving, so that they can save him his share of the rent. In these circumstances, the landlord is under no obligation to accept any new tenant. If the landlord wished to accommodate the tenants however, we would advise that the parties enter into a fresh tenancy agreement rather than trying to amend the old one. If a tenant dies, all rights and obligations in the tenancy will pass automatically to the remaining tenants. What is included in the tenancy agreement?
Make sure specific mention is made of areas of land or parts of buildings that are included in the letting. In that way, those parts will be kept clean and maintained by the tenants. Conversely, make sure you exclude areas you do not intend to include. The area of greatest dispute is car parking on access and through ways. You should "spell out" what is allowed and what is not. Amount of deposit
There are no "usual" amounts or proportions for a deposit. Clearly, a deposit should be enough to cover any likely dilapidations. It should also provide an incentive to the tenants to maintain the property in a clean and undamaged condition. It may boil down to "what the tenants can afford". The most usual deposit is for one month's rent. The deposit return procedure should be clear, fair and prompt, since the tenant may require the money urgently for his next accommodation, whether rent or buy. Tenant's covenants
Net Lawman agreements contain a very full list of all the items you might wish to include. You may wish to delete from or add to this list. Some may not apply.
Rent increase
Whilst it is possible to increase the rent from time to time, we strongly advise that the tenancy term should be fixed over a sufficiently short period as to give the landlord the option to increase the rent and change any other terms too, after its expiry. The most common term is 12 months. This position allows for the continuation of the tenancy agreement as a periodic tenancy, which the landlord can terminate at any time, on two months notice (possibly, plus time taken to go to court for an order). If a tenant wishes to remain in occupation, then you can agree terms and rent, and incorporate them in a new agreement. Provided the basis remains an assured shorthold tenancy, the landlord's interest in ultimate possession is protected. Stamp duty on leases
Most residential tenancy agreements are within the exempt band for stamp duty. Here are the rules: you cannot use as evidence in court any document transferring an interest in property, unless it has been stamped. That includes a tenancy agreement. The rate is calculated as a percentage of the average rent for the term. Current rates of duty are:
Length of Term Rate of Duty
Not more than 7 years or indefinite * 1%
More than 7 years but not more than 35 years 2%
More than 35 years but not more than 100 years 12%
Over 100 years 24%
* There is no duty payable on a lease for less than seven years if the rent is less than £5,000.
Stamp duty is paid to the Inland Revenue, and all your questions can be answered at http://www.inlandrevenue.gov.uk/rates/stamprates.htm Evicting tenant in breach
Reasons for wanting to evict a tenant are called “grounds”. There are generally three categories of grounds on which a landlord might consider evicting a tenant:
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The fixed term of the tenancy has expired;
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The tenant in behind with rent payments;
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The tenant is in breach of some other term of the tenancy agreement. Keep it Simple
Before embarking on possession proceeding on either of the last two grounds, you are advised to consider very carefully whether you have complied fully with all of the landlords obligations, whether or not set out in the lease. If you are aware of any complaint by a tenant, look into it carefully. If the complaint concerns the condition of the property, it is far cheaper to attend to it than to argue in court. The difficulty with court proceedings is that they are a lose-lose situation for a landlord, in that most tenants will be eligible for legal aid, with the result that even a win will result in a large bill from your own solicitors. Grounds for Possession
By the Housing Act 1988, these are the grounds under which a landlord may seek possession in respect of tenancies entered into after 15 January 1989:
The full text of these grounds is on this web site at http://www.netlawman.co.uk/acts/housing-act-1988.php
Mandatory Grounds, where the court must order the tenant to leave the property if the landlord can prove one of these grounds exists:
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Section 21 Housing Act 1988
on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy, a court shall make an order for possession of the dwelling-house if it is satisfied:
(a) that the assured shorthold tenancy has come to an end and no further assured tenancy
(whether shorthold or not) is for the time being in existence, other than a statutory
periodic tenancy; and
(b) the landlord has given to the tenant not less than two months' notice stating that he
requires possession of the dwelling-house.
A notice may be given before or on the day on which the tenancy comes to an end and shall have effect notwithstanding that on the coming to an end of the fixed term tenancy a statutory periodic tenancy arises.
A court shall make an order for possession of a dwelling-house let on an assured shorthold tenancy which is a periodic tenancy if the court is satisfied:
(a) that the landlord has given to the tenant a notice stating that, after a date specified in
the notice, being the last day of a period of the tenancy and not earlier than two
months after the date the notice was given, possession of the dwelling-house is
required by virtue of this section; and
(b) that the date specified in the notice under paragraph (a) above is not earlier than
the earliest day on which, the tenancy could be brought to an end by a notice to
quit given by the landlord on the same date as the notice under paragraph (a) above.
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Ground 1 - when a landlord or his spouse has occupied the dwelling as his only or principle home at some time, and has given notice of his intention to return. Successors in title to the landlord may also use this ground provided they did not purchase the dwelling. (That covers family members).
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Ground 2 - a mortgagee requiring possession in order to exercise a power of sale. The mortgage must pre-date the tenancy and the tenant must have been warned about this possibility in the tenancy agreement.
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Ground 3 - the property has been the used for holiday lets within the last 12 months and has currently been let on a fixed term of up to 8 months. This is to enable holiday lettings to continue in the next season.
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Ground 4 - the property is owned by an educational establishment and has been let to one or more students for a fixed term of up to 12 months.
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Ground 5 - the property is owned by a religious body, and possession is now required in order to accommodate a minister of religion.
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Ground 6 - the landlord requires possession in order to demolish or substantially reconstruct the building.
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Ground 7 - where a tenant dies, the landlord may obtain possession against any person in occupation, provided proceedings are commenced within one year of the tenant's death (or later if the court allows) irrespective of whether rent was accepted or not. This ground cannot be used against a surviving spouse.
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Ground 8 - rent arrears. The court must make an order for possession provided:
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The arrears exceed 8 weeks if the rent is paid weekly or fortnightly, 2 months if paid monthly, or one quarter if paid quarterly, or 3 months if paid yearly;
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The arrears continue both at the date of the landlord’s notice and at the date of the hearing.
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The landlord, including notice that possession is sought on this ground; has given proper notice;
Discretionary Grounds, where the court will decide after hearing the parties:
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Ground 9 - the landlord has offered the tenant suitable alternative accommodation and the tenant has refused it. The new property and the tenancy terms offered must be broadly comparable with the existing tenancy. The landlord may have to pay removal expenses.
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Ground 10 - rent is in arrears, but by less than the amount set out in ground 8.
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Ground 11 - the tenant is persistently late in payment of rent. Note that the court may take into account reasons for the delay beyond the tenant’s control.
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Ground 12 - the tenant is in breach of one or more terms of the tenancy agreement, other than rent payment.
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Ground 13 - the tenant has intentionally, or negligently or carelessly damaged the property or allowed others to do so.
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Ground 14 - the tenant or someone on the premises with his consent is causing a nuisance to neighbours or is using the property for illegal or immoral purposes.
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Ground 15 - the tenant has intentionally, or negligently or carelessly damaged the landlord’s furniture or allowed others to do so.
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Ground 16 - the tenant was an employee of the landlord and the employment has now been terminated.
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Ground 17 - the tenancy has been created as a result of a false statement knowingly made by the tenant or someone acting on his behalf.
The cost and trouble associated with obtaining possession against a tenant under section 21 is quite low and does not need special legal expertise. Net Lawman will assist you in drafting terms for the Housing Act grounds.
It may be important when you come to court to be able to prove service. The way to do this is to keep a very precise record of the time and date you posted or handed the document to the tenant. Use recorded delivery if by post; alternatively, make sure the person who placed the letter in the box is available! Of course, you should keep a copy of every item sent. New landlord’s financial health warning
Our advice is do not become a landlord unless:
- Your house is in good condition;
- Your house complies with statutory requirements relating to water, gas and electricity;
- You are prepared to take up references and wait for the replies;
- You are prepared to devote a few hours a month to it (possibly much more);
- You have a signed tenancy agreement before you let your tenant anywhere near your property;
One last point - use a proper tenancy agreement. There are plenty of cheapie versions to avoid. You might even find one for sale at your local supermarket! Your house is worth more than £10! | 
