Residential lettings: considerations for landlords
Law regulating landlords and tenants stretches back hundreds of years. Early law aimed to rebalance the rights of agricultural tenants, whose livelihoods depended on the land, over landowners. As a result of statutory law being in place, landlords cannot force tenants to accept terms that reduce the rights legislated by Parliament.
A tenancy is more than just the right to occupy the property. It is the right to take on the property in place of the landlord, and in doing so, the responsibility to look after the property as the owner would reasonably do so.
Security of tenure – the right for the tenancy not to be ended by the landlord except in specific circumstances – is one the underlying rights that distinguishes tenancies from other types of letting agreement.
Assured shorthold tenancies
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 more and more complicated until the Housing Act 1988 sidestepped some of the earlier legislation by providing that landlords could create a new type of tenancy, called an assured shorthold tenancy (AST), to which the older legislation would not apply. That act, relevant to all tenancies granted after 15 January 1989, now contains most of the relevant legislation. The Housing Act 1996 further simplified the procedures.
Almost all new tenancies are assured shorthold tenancies, the main features of which are:
- the tenancy has a fixed term - usually between six months and 3 years and then continues on a rolling (periodic) basis
- the tenant has exclusive occupation of all or part of the property
- the property is not used for agricultural or business use
- 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 end a tenancy
The importance of using the right type of agreement
Whether or not a situation is a tenancy, and the rights of the landlord and the tenant, depend not on the name of the agreement that was made, but on the circumstances of the situation itself.
If a landlord is not to forego the rights that he or she could have, but does not have automatically, it is important that he or she uses a tenancy agreement if the situation is one of tenancy, and not another agreement that aims to reduce the statutory rights of the tenant.
For example, for some years the grant of a licence to occupy was considered to be a way to avoid granting security of tenure to a tenant, so that the landlord could evict the tenant at short notice. That loophole has been closed. A licence should only be given in certain circumstances.
If the wrong type of agreement is used, the landlord is in a much weaker position, particularly with respect to being able to choose when the tenancy is ended.
Why using a written agreement is important
Much of the law passed by parliament aims to give tenants automatic rights. In many situations, the only way a landlord can rebalance those rights is to agree them with the tenant.
A written agreement provides a clear record of what both sides agreed, and to what promises the tenant is legally bound (provided they are not unfair).
In addition, the landlord has an obligation to provide certain details in writing within six months of the start of the tenancy. Putting the entire agreement in writing is the easiest way to comply with the law.
If it becomes necessary to evict a tenant, the landlord can only use the "accelerated possession" procedure if there is a written agreement.
There are also other reasons why a written tenancy agreement is preferable.
Fixed and periodic terms
It is usual for a tenancy agreement to be expressed as for a specific length of time, known as the "fixed term". For an AST, the fixed term must be at least 6 months. By law, it cannot be shorter. A fixed term provides some certainty to both parties.
When the fixed term expires, the tenancy continues and the tenant may continue in occupation, rolling over the rent. 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 gives notice then leaves or the landlord serves a notice and obtains a court order.
During the fixed term, the tenancy cannot be ended, except if the tenant severely breaches the agreement, or the parties mutually agree to do so. If you want to rent for a short-term, you have to be careful about what type of letting agreement you enter into.
When the tenancy is periodic, it can be ended by either side. The landlord must give at least two months’ notice.
Entering into an agreement before the tenancy starts
A tenancy starts as soon as the tenant comes into occupation. Once in occupation, cannot be forced to sign an agreement - a tenancy already exists. It is therefore essential that an agreement is signed in advance of occupation.
Joint and several liability for rent
If a property is rented to multiple tenants, the landlord may be able to choose whether to let to each individually or all together under a single agreement.
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 rent and the obligations under the lease. If the rent is not paid, the landlord may approach any one of the tenants to repay it wholly.
The tenants may have an informal agreement between themselves as to who pays what share, but in law, each is responsible for the whole amount if the others do not pay.
It is important that tenants understand this concept. If they do, they will be more likely to take more care of the property and make sure rent is paid on time.
Taking a deposit gives the landlord greater security if the tenant damages the property or the contents. However, there are rules about taking a deposit, and what constitutes damage against which the deposit can be used, versus what is fair wear and tear that is the landlord's responsibility to repair.
Taking personal information and references before giving possession
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.
Landlords should check references thoroughly. In particular, the landlord giving the reference should have rented at arm's length, and should not be a relative or friend. A telephone call, and not just an e-mail message is a good way to obtain answers. If there are any doubts, the landlord should decline the prospective tenant and advertise again.
Insisting on a guarantor
A landlord should always obtain a guarantee from a third party if he or she has any doubt as to whether the tenant has the means to pay the rent. This applies to letting any sort of property – not just residential ones.
The guarantee clause is best included within the tenancy agreement, rather than in a separate agreement.
If the tenants are jointly and severally liable for the rent, then the guarantor also becomes jointly and severally liable. If the guarantor does not know or trust the other tenants, then he or she may not wish to step in. In this case, it is better to insist that the tenants find another guarantor than accepting a limitation of liability.
A further safeguard against an absconding tenant is to obtain a parental address, even if the parent is not guaranteeing the payment.
Useful documents and further information
Net Lawman offers a range of assured shorthold tenancy agreement templates that you can use as the basis for your contract.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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