Terms in a residential tenancy agreement
Every tenant has a legal right to certain information about the tenancy. A landlord commits a criminal offence by not providing these key terms:
- in writing
- within 6 months of the start of the tenancy
- and within 28 days of a request by a tenant (unless the landlord can argue that he was reasonably unable to comply within the timeframe)
It doesn't matter whether there is a written tenancy agreement or whether the terms have been agreed orally. This information still must be provided in writing.
Given that a landlord will have to do this, it makes sense to use a written tenancy agreement to record the whole contract. There are other good reasons to use a written residential tenancy agreement as well.
The landlord should provide the tenant with a copy of the signed agreement (preferably one of several originals signed by the landlord and all the tenants) on the first day of the tenancy. The landlord should keep a copy of the first and every other tenancy agreement safe.
Key terms for every tenancy
The tenancy's start date
A tenancy agreement should clearly state the date on which the tenancy starts.
Many of the most important rules governing tenancies rely on knowing the date the tenancy started.
For example, all tenancies have a "fixed" period during which neither the landlord nor the tenant can end the agreement (except on certain grounds). To work out when a fixed term ends (so that the landlord can give Section 21 notice to quit), he needs to know when the tenancy started.
The rent due date
Usually, rent is payable in advance on the same day of the month or the week that the tenancy started.
Landlords who let several properties usually prefer for ease of administration that rent for all properties is paid on the same day. If so, the agreement should state that day.
If the tenancy is to start on a different day to the rent due date, it is usual for the tenant to pay an irregular amount for the first month (the regular amount prorated by the number of days remaining until the first regular amount is due), and it is usual to provide in the agreement for the fixed term of the tenancy to end at the end of a rent period.
Instead of stating that the fixed period is for a number of months, the agreement can state the start and end dates instead.
The (fixed) term
In England and Wales, an assured shorthold tenancy (that isn’t a continuation of a prior one) cannot be for less than six months, and all ASTs must have fixed terms of at least six months. In Scotland, the tenancy agreement must be for at least six months to be a SAT.
One of the legal effects of the fixed term is that the tenant remains liable for rent throughout the period of the fixed term regardless of whether he lives at the property. So if he decides to move out after 3 months of a 6 month fixed term, he must still pay the landlord for the remaining 3 months.
The only circumstances in which this is not true is if the property has been relet, either by the landlord (requiring the permission of the tenant and effectively ending the old tenancy by mutual agreement) or by the tenant (either requiring an assignment or transfer clause in the agreement, or with the permission of the landlord).
Fixed terms are usually for no longer than 6 months for good reason. Tenants aren't always as well behaved as they may first seem and may cause unforeseeable problems down the line such as late rent payments or noise disruption to neighbours. The process to serve notice at the end or after a fixed period is much easier to follow than the process to evict a tenant during. So with a short fixed period, the landlord can remove problem tenants much faster and more easily than with a longer fixed period. If the tenants are in fact good, then an AST allows them to continue living at the property at the end of the fixed term on the same terms under periodic tenancy without any additional contract. Or, the landlord could end the first tenancy agreement and both parties could agree to a new one.
Most landlords ask for rent to be paid monthly, which suits most tenants who are paid monthly. For some tenants, a landlord may wish to collect rent weekly or fortnightly, as smaller amounts paid more frequently may suit tenants who have difficulty planning cash flow. If rent is collected weekly, then the landlord must use a rent book to record payments.
By default, the law implies that rent is paid in arrears. A tenancy agreement can specify that rent is payable in advance. Payment in advance helps a landlord's cash flow, particularly if a tenant is ever late in payment of the rent. The tenancy agreement can also state how the rent is to be paid (e.g. by standing order or direct debit direct into a bank account).
Terms relating to the property
The agreement should define clearly what is being let. In a business property lease, this would usually be done with reference to a map. However, unless a house is large, it is unlikely that a tenancy agreement would do so. Instead, the property should be described as completely as possible, using house numbers as well as names (and relative location if a flat, e.g. ground floor flat number 4).
If there are outbuildings, separate land or any part of the property not being let (perhaps the landlord wishes to let it separately or wishes to use it himself), it should be made clear that these are excluded. If the property has a designated parking space in a communal parking area (particularly relevant in large blocks of flats) then the space should be clearly marked and referenced in the agreement.
Responsibility for maintenance of the property
Landlords are responsible for structural repairs and maintenance of the property by law, and cannot contract out of this responsibility. However, the tenancy agreement should state whether the landlord or the tenant is responsible for non-structural repairs (such as fixing a broken curtain rail) and (re)decoration.
It is worth noting that a landlord may have more incentive to fix a problem correctly and for the long term than a tenant may have, so even if it is the responsibility of the tenant to carry out non-structural repairs, it may be in the interest of the landlord to offer to do so.
Tenancy agreements usually contain a paragraph that obliges the tenant to maintain any garden or external area although it may be difficult to argue that the tenant allowing "wild" flowers to grow devalued or enhanced the value of a garden.
A term allowing the tenant to redecorate should be with the landlord's permission not unreasonably refused, or in the current style and colours, so that the tenant does not redecorate in a style that would be unattractive for later habitants.
A tenancy agreement usually states that tenants are not allowed to damage the property. It is common for the clause also to include furniture and contents as well. Improvements without the landlord's consent to prevent alteration, including the changing of locks, are usually also forbidden.
Use (including prohibited uses)
Unless specified in the tenancy agreement, a tenant can enjoy quiet occupation and use the property for any purpose. It is advisable to limit use to occupation of a single, private, residential dwelling and to include paragraphs that forbid antisocial behaviour.
If the property was bought subject to conditions of use (many new build flats now have terms of purchase that restrict actions such as drying washing on balconies) then these should be included in the tenancy agreement as well. Tenants should never be allowed to run a business from the house either, as the property may become bound by non-residential property law instead.
Landlords can restrict what the tenant does in the property provided the restrictions are reasonable. "Reasonable" is hard to qualify. As a very general rule of thumb, if the use would result in likely damage or devaluation of the property it is likely that a term restricting that use would be reasonable.
Landlords should make sure that terms intended to restrict a use reasonably do not restrict other uses unreasonably. For example, a term that restricts keeping pets may be unreasonable if the tenant wishes to keep a goldfish, but not if he wishes to keep a dog.
The easiest way to control use is not to blanket ban certain use, but qualify the restriction with "without the landlord's permission, not to be unreasonably withheld". That way the landlord can make judgment on a case by case basis.
Note as well that a landlord cannot prevent the tenant from using the property in a way in which the landlord disproves. For example, a tenant cannot be forced to clean the property to a set timetable, or not to have guests to stay overnight or not to cook certain types of food. As long as the tenant does not harm the property, all that the landlord can ask is that the property is left in the same condition at the end of the tenancy as at the beginning.
Other money items
If a deposit is taken then the amount and who will hold it should be recorded in the tenancy agreement. All deposits for assured shorthold tenancies are required by law to be held by a government authorised tenancy deposit schemes.
For most tenancies, the deposit cannot exceed five times the weekly rent.
Payments included in the rent or other than rent
Sometimes a landlord will prefer to keep utilities and other bills in his own name, perhaps because of the administrative burden of transferring them to the tenant. This isn't advised. Some bills may be based on consumption when the tenant has no incentive not to consume (such as in the case of electricity, gas and water) and the landlord may face much greater bills than he expected. The tenant may also need some utility bills in his own name to be able to prove that he lives at the address.
If the landlord does wish to pay the bills himself, the cost can either be included in the rent (as part of the fixed amount) or specified as an additional payment that covers the bills (but not more). Which bills are paid by whom should be recorded in the tenancy agreement.
Our advice is to let the tenant pay for all associated service costs including council tax. Collecting additional payments creates another administrative burden, disrupts the landlord's cash flow and can be problematic to enforce.
Many penalty clauses are liable to be found void under the Unfair Terms Regulations (see our article on unfair terms in letting agreements). Penalty clauses need to be used very carefully.
Penalties cannot be excessive in size, nor unjustly charged. A penalty clause should recompense a landlord for costs incurred, not punish the tenant. It would be wise to draw the tenant's attention to any penalty clause before the tenancy agreement is signed. Commonly this would be done in a covering letter.
Examples of penalty clauses are:
Interest on late payment of rent
A clause allowing interest on late payment of rent is recommended, although it should not be excessive.
Under the Tenant Fees Act, the interest rate cannot exceed more than 3% above the Bank of England’s annual percentage rate on the day that the payment is outstanding, or reasonable costs incurred by the landlord.
If the clause is not included, a landlord can only claim interest if he starts court proceedings. The agreement must state on what amount interest is payable, i.e. rent lawfully due.
Fixed penalties instead of interest payment
Fixed penalties are easier to calculate than interest. If the fixed amount is for a low amount, it will probably be seen as fair, but the landlord may be better off charging interest than a fixed amount. Not only may he or she recover more of his or her costs from non-payment, but he or she is also less likely to be challenged on whether the term is fair.
Expenses are fair (such as administration charges to send a letter to the tenant notifying him of unpaid rent) provided the charge reflects the true cost and provided the expense is necessarily incurred. Charges cannot penalise the tenant. Excessive charges would be deemed unfair.
However, with the Tenant Fees Act, a tenant may challenge expenses, whatever the value. The cost of proving that they are fair is likely to be far more than the amount of the expense itself.
Landlords should expect some cost to letting their property and would absorb such costs themselves.
Rent review clauses
Rent review clauses are becoming less common in tenancy agreements, particularly ASTs, because it is usually simpler for the landlord to serve notice and end the current tenancy then agree a new tenancy on new terms. The effect of the tenant not signing the new agreement is the same as the tenant not agreeing to a higher rent - that the original tenancy ends and the tenant moves out.
A rent review clause provides for a review by an independent party as to what is a fair rent. A true rent review (and not just a pre-agreed rent increase) may decrease the rent or increase it. Rent reviews should only take place after the fixed term has ended.
Rent can also be increased periodically by a pre-agreed amount or reference to an index such as inflation after a certain amount of time. Period reviews are less "reviews" and more just increases since they aren't related to "market" conditions. Pre-agreed increases could take place at any (pre-agreed) time, including during the fixed term.
Tenants have the right to quiet occupation. The tenancy agreement should state that the landlord or an agent (such as a tradesman) should be allowed to enter the property if reasonable notice is given in writing and the tenant consents. It should also state that in emergencies this requirement will not apply.
The tenant must consent to access. If he does not, the landlord cannot enter under any circumstances. However, constant refusal may put a tenant in breach of contract, so it is not in the interest of the tenant to refuse. Landlords should ensure that they always keep at least one set of spare keys.
Transfer of the lease (assignment) and subletting
Most tenancy agreements would contain clauses preventing the lease being transferred to anyone else, or the tenant subletting some or all of the property to someone else. Allowing the tenant to do either reduces the control the landlord has over who lives in the property, what rights the tenants have, and how they can be removed.
Not allowing assignment may be deemed "unfair". One way round it (subjectively) could be to allow a tenant to end the tenancy if he finds a suitable replacement and if the landlord's costs are covered. The landlord can then enter into a new tenancy agreement with the new tenant. The landlord could be able to approve the new tenant, but his approval should not be withheld unreasonably.
A tenancy agreement will usually specify that the landlord should provide building insurance and the tenant may or may not provide contents insurance for his or her own possessions. A landlord cannot force the tenant to insure the tenant's possessions, nor can he or she specify who the insurance company should be, or what level or insurance should be taken out.
If the landlord does insure the property, the tenancy agreement may specify any prohibited activities that would invalidate the insurance. The tenant may be responsible for any insurance premiums as a result of his or her action - although this can be difficult to prove.
A landlord should give the tenant a copy of the insurance policy and a summary of key terms so that the tenant knows what he or she may or may not do under the terms of the insurance.
Tenants' property left after the tenant has vacated
The landlord cannot (by law) dispose of any property left by the tenant after the tenant moves out (whether at the end of the term, or by abandonment). If he or she does, and the property has value, he or she may be subject to a claim for damages from the tenant.
Most tenancy agreements therefore have terms that allow the landlord to deal with property left behind that allow a landlord to dispose of items with the tenant's permission (perhaps for a fee payable to the landlord), or sell them and return the proceeds to the tenant or to forward them on to the tenant (at the tenant's cost).
Landlord's address for service
The tenancy agreement has to include the address at which the landlord (or his or her agent) can be reached for the sake of giving notice. If it does not, then rent is not due until the address is given.
This term is particularly relevant for landlords who are resident abroad or who are owners of property in England or Wales but who live elsewhere in the UK.
It is not a legal requirement to provide the landlord's address if the property is in Scotland.
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.
Parental guarantees are usual. If the tenant or guarantor is not a householder, then obtain proof of his financial substance.
A guarantor can either sign the tenancy agreement, or he can sign a separate document that brings the guarantee into the contract. A guarantor is only liable on the terms when he signs, so if the terms change (for example, the rent) he will need to sign new documentation.
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!
A forfeiture term is essential because it allows a landlord to evict a tenant during the fixed term under specific certain circumstances (as laid out in Housing Act 1988 or the Housing (Scotland) Act 1988).
A forfeiture clause ends the tenancy agreement, but doesn't give the landlord any rights to re-enter (which can only be done by a court bailiff or a Sheriff Officer in Scotland after a possession order has been given by court). So if a tenant fails to pay rent, the tenancy may end but the tenant might stay on living at the property. To evict the tenant, a court order would need to be sought.
Forfeiture clauses are often drawn badly, rendering them "unfair" and therefore void. The circumstances under which the tenancy become forfeit, and the process that will be followed if it does need to be clear, reasonable and not contravene statute law (for example, state that the landlord has a right to re-enter).
Inventory (or schedule of condition)
Even in unfurnished properties, an inventory is usually made for the carpets, fixed installations such as sinks and baths, windows and doors, and the decor. For furnished properties, the inventory would also include items of furniture and soft furnishings such as curtains and lampshades.
The inventory is a record of state. The state of cleanliness of the property is recorded, as is every item and it's condition. It is common for the inventory to record gas, electricity and water meter readings, and also the date and result of tests on electrical items (such as a refrigerator).
The inventory prevents either the landlord or the tenant disagreeing about the original state of the property at the end of the tenancy, particularly whether wear and tear on the property is reasonable.
A landlord will usually commission an independent (and hopefully impartial) inventory clerk to make the inventory so that there are no claims that the landlord pressured the tenant into accepting it. It is a good idea to have the inventory made while the tenant is present in the property (so that he can contest any incorrect descriptions) and to take photographs of the condition of rooms and valuable items. Photographs need to be clear and include a ruler or other measure to show scale, especially of existing damage.
The inventory should be signed and dated by both the landlord and the tenant and a copy attached to the tenancy agreement.
The tenancy agreement should state that an inventory will be prepared, who will prepare it and who will bear charges relating to the preparation. The tenant could be reasonably expected to bear half the total costs (of both an inventory at check-in and at check-out), but it a term that makes the tenant bear all costs would be likely to be deemed unfair and void under the Unfair Contract Terms Regulations.
Further information and useful documents
You may be interested in reading about the various types of legal arrangement for letting property next.
If you require a tenancy agreement template, you can find our collection here.
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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