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Guide to Tenancies

Updated December 2023

Contents

Introduction

Many landlords may have commented that the formalities and bureaucracy surrounding tenancies are incomprehensibly complex.

Here at Cover4LetProperty it’s hard not to have some sympathy with that and other sentiments like it. Here we will try to focus on the core issues associated with Assured and Assured Shorthold Tenancies in England and Wales. Different legislation applies in both Scotland and in Northern Ireland.

UPDATE December 2023:

The Government is planning to replace the Assured Shorthold Tenancy, when new legislation under the Renters Reform Bill comes in. Until then, the existing rules apply.



Warning

The nature of any given tenancy may have important legal ramifications for you as a landlord.

What follows is a general discussion and not qualified legal advice. If you are in any doubt as to a course of action, you should consider seeking expert and qualified legal input.

Please note that the information is based on our understanding of current legislation as of the date of writing, but legislation may change. We cannot be held responsible for any errors, loss or omissions.

What is a tenancy?

Theoretically, this is the easy bit! A tenancy is a framework of rules and regulations that governs the relationship between you and your tenants.

Although there may technically be legal differences between a tenant and someone lodging in your home (sometimes also termed a licensee) the fact is that the relationship between you and someone paying you any sort of rent will be governed by law.

That law can be expressed in one or more of several different ways:

  • It can be enshrined in legislation – in this format, you cannot vary whatever the law prescribes even if you and your tenant agree otherwise in writing;
  • the interpretation of relevant legislation that is written down and presented in the form of a tenancy agreement; and
  • variations of the previous two formulations, except that the law is reflected by way of a verbal agreement or agreements.

In other words, even if you have tenants in your property and not a single piece of paper exists to govern the relationship between you, they will still have a significant number of legal rights as laid down in the law.

The tenancy agreement

Unfortunately, the question as to whether or not you need a tenancy agreement has become much more complicated over recent years:

  • in England and Wales, there is no legal obligation to put a tenancy agreement in place (unless the agreement is longer than 3 years) though there may be certain exceptions for certain categories of social housing – you might also want to note that some local authorities are piloting schemes making landlord registration mandatory in their area and some, as part of that, may be insisting upon the production of a written tenancy agreement;
  • in Northern Ireland, too, if the tenancy began on or after the 1st of April 2007, you must provide any tenant with “a statement of tenancy terms”;

This leaves an element of doubt and uncertainty about the requirement for a formal tenancy agreement in various parts of the UK. Wherever in the country you have taken on the role of landlord, therefore, you might want to confirm any current regulations with the relevant local authority or council.

But you might also ask yourself whyever you would not grant a formal tenancy agreement in the first place. It is likely to be at least as much in your interests as those of your tenants.

Once again, you might want to refer to the Government website for general information on private tenants agreements.

Types of tenancy

There are a large number of variables relating to the types of tenancy that might have been granted – and they can all make the position for an individual landlord somewhat different:

The date the tenancy commenced

  • broadly speaking, if your tenants have been with you since before the 1990s or from before 1989, these historic tenancies are likely to differ substantially from those of today but, since they represent only a minority of cases, brevity dictates that we won’t be discussing them further here;

Your own place of residence

  • if you share the same living spaces as someone paying rent to you and they have no area that is clearly and distinctly their own (where you have no right of entry), a different category of legal framework will apply – arrangements such as this are frequently describe the tenant as a lodger and we offer no further comment on those situations;

The part of the UK your property is in

  • even if the types of tenancies go by more or less the same name, the formal, legal interpretation may vary depending upon which country of the United Kingdom your property is in;

The amount of annual rent charged

  • if the amount is above or below certain specified annual limits, that might directly affect the type of tenancy agreement you can use.

This is just a small sample of some of the issues that may decide what type of tenancy agreement you must use, or which is likely to be most appropriate.

In what follows we will be commenting on the most common type of tenancy – that is to say, those commonly called an Assured or Assured Shorthold tenancy.

Assured and Assured Shorthold tenancies

These are by far the most common forms of tenancy today and in the absence of any tenancy agreement statement to the contrary, it will be presumed that the basis of the letting is that of an Assured Shorthold Tenancy (AST).

The differences between Assured and Assured Shorthold Tenancies have their origins in government efforts in the late 1980s and throughout the 1990s, to try and increase the stock of affordable properties available for rent.

Essentially, the objective was to try and make it easier for landlords to let their properties to tenants on a manageable commitment basis, meaning that they could gain access to their property again within reasonable time frames.

Assured tenancies

  • this type of tenancy essentially means that you will not be able to regain possession of your property unless your tenant breaks the terms of the tenancy agreement – that might be in terms of tenants having become a social nuisance to others around them or for failing to pay the rent;

Assured Shorthold tenancies

  • The main difference between this type of tenancy and the Assured Tenancy is that the landlord has the right to take their property back after six months, providing two months’ notice is given – it is a flexibility that naturally proves attractive to landlords.

Points to note on Assured and Assured Shorthold tenancies

Against this general background outlining the essential nature of Assured and Assured Shorthold Tenancies, some additional points need to be taken into account:

  • assured tenancies of either type do not apply to holiday let or other commercial arrangements;
  • if your tenant has an existing Assured Tenancy, you cannot change over to a shorthold tenancy;
  • if you do have any tenants that have been in place since before 1997, by default they will probably be deemed to hold an Assured Tenancy and not an Assured Shorthold Tenancy;
  • if you wish to set up an Assured Tenancy with a tenant, you must declare it in writing to them – in the absence of such, it will be presumed to be a shorthold tenancy;
  • it’s important not to confuse the concept of an Assured Shorthold Tenancy with the letting contract’s term – you can agree on a fixed period for the letting as part of the contract discussion but even if this is less than an initial six months, you will not be able to force the tenant to depart in a shorter period of time if they change their mind;
  • it is typically a requirement for you to seek the permission of the freeholder of your property or your mortgage provider, before using it for rental income purposes – whether you are granting an Assured Tenancy or an Assured Shorthold Tenancy, their permission may be explicitly or implicitly given on the assumption that you are offering standard shorthold tenancies rather than assured tenancies.

Summary

With successive changes to the raft of legislation over the previous 15 or 20 years, tenancies have become steadily more complicated than at any time in the past.

The good news for most landlords is that for the majority of lettings, the Assured Shorthold Tenancy remains simple to apply and is one that provides the degree of flexibility required for a successful buy to let business.

Nevertheless, it’s important to bear in mind the numerous exceptions to the generalities of all that we’ve mentioned so far. There is no substitute for sitting down and reading the guidelines in detail yourself.

It is a good idea to do this before you start letting property rather than only once you have run into difficulties – unless you enjoy the prospect of paying out large sums of money to solicitors!

Further reading: the charity Shelter has more information on the different types of tenancies for England,  Scotland and Wales.

Please note that this information is based on the author’s current understanding of law, which may be liable to change. Always seek professional advice if you are unsure.