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Tenancy agreements

>> Written tenancy agreements

Landlords should be aware of the benefits of written tenancy agreements and the procedures necessary for obtaining such an agreement.  Generally it is most inadvisable to hand over the keys to a property unless your tenants have signed a form of tenancy agreement.

>> Benefits of written tenancy agreements

This is only required by law for fixed-term tenancies of greater than three years. However, it is highly advisable to have a written tenancy agreement, and to get the tenant to sign this before going into occupation. For example:

  • It will prevent disputes later over what was agreed
  • A well drafted tenancy agreement will help protect your interests
  • You cannot force tenants to sign a tenancy agreement once they are in occupation of the property
  • You may experience difficulties in evicting the tenant if you are unable to produce a tenancy agreement and in particular
  • You will not be able to use the special ‘accelerated’ possession procedure [see Accelerated Possession Procedure] as this can only be used where the tenancy and its termination can be shown from the paperwork

>> Tenants' right to a written statement

A tenant who does not have a written agreement has a right to ask for a written statement of any of the following main terms of the tenancy:

  • The date the tenancy began
  • The amount of rent payable and the dates on which it should be paid
  • Any rent review arrangements
  • The length of any fixed term which has been agreed.

The tenant must apply for this statement to you, the landlord, in writing. You must then provide the statement within 28 days of receiving the tenant’s request. If you fail to do this, without a reasonable excuse, this is a criminal offence for which you can be prosecuted and if found guilty, fined.

>> Implications of oral agreements

There is no reason legally, why a tenancy should not be created orally.  If a tenant goes into a property and starts paying you rent, then this will be a tenancy notwithstanding the fact that there is no written agreement. 

It is not possible, for example, for you to allow the tenant to live in the property ‘on approval’ on the basis that you will give them a tenancy later. If they have exclusive occupation of the property and pay a rent, then they will automatically be a tenant and will be entitled to all the statutory protection provided to tenants under the law.

>> Preparing a written agreement

Although landlords may draw up their own agreements, this is not advisable. Drafting tenancy agreements is a highly skilled job and landlords doing this without legal advice may find that they have actually made their position worse in the very areas where they were seeking to protect their position [for further detail see Unfair terms in tenancy agreements below].

It is far better to use one of the many excellent standard tenancy agreements which are available from landlord associations, law stationers, the larger general stationery stores, the many online services available for landlords, and some local authority housing advice centres. If you need these altered you should seek specialist advice rather than doing it yourself.

Prospective tenants should be given every opportunity to read and understand terms of the tenancy, and any other agreement, before becoming bound by them.

Following changes to stamp duty in 2004, tenancy agreements are no longer required to be stamped in order to have validity unless they are of very high rent value. However, more details can be found in the Inland Revenue leaflet ‘Stamp Duty on Agreements Securing Short Tenancies’ available from any Stamp Office. The Stamp Office Helpline can provide more advice on stamp duty on:

0845 603 0135

You will need two tenancy agreements, one for the tenant(s) and one for yourself. You should keep the copy signed by the tenant and the tenant should keep the copy signed by you, but there is no harm in having both of you sign both copies.  If the tenant is going to go into the property immediately the tenancy does not need to be witnessed, but if they are not going to move in for a while (for example when students sign up in June to go into a property the following September) it is best to ensure that the agreements are signed ‘as a deed’ which means getting the signatures witnessed by someone independent. 

Be careful when completing the agreements, and if they are written by hand, ensure that they are legible.  Remember that they may one day be scrutinised by a Judge if you ever need to evict your tenants!  Make sure also that an address is given for the landlord. Under s48 of the Landlord and Tenant Act 1985, rent will not fall due unless this is done. The address must be in England and Wales. It is acceptable for the address to be the address of your agent or a business address rather than your personal home address. If no address for the landlord is given at all this may cause difficulties if you later want to evict your tenant for arrears of rent. 

>> Unfair terms in tenancy agreements

There are now regulations to ensure that contracts between a consumer and a business are ‘fair’. These are the Unfair Terms in Consumer Contracts Regulations 1999. It has been confirmed that they apply to tenancy agreements.  The Regulations are administered and enforced by the Office of Fair Trading (OFT) who have issued guidance (most recently in September 2005) on their effect on tenancy agreements.

The Regulations do not cover the core terms of a contract (e.g. the rent and property details) except in so far as they require that the contract must be in plain English.

A standard term is unfair if it creates a significant imbalance between the parties rights and obligations to the detriment of the consumer and contrary to the requirement of good faith. If a term is found to be unfair it will be void and unenforceable.

So far as tenancy agreements are concerned:

  • Any clauses which limit or exclude rights (e.g. legal rights) which your tenants would otherwise have had, are almost certainly going to breach the regulations and be deemed unfair, unless there is a very good reason for them (which should be apparent from the agreement)
  • Clauses which impose any penalty or charge on your tenant must provide for or state that the charge should be both reasonable in amount and reasonably incurred
  • Where a clause states that a tenant may only do something with the landlords written consent, this should be followed by the words “(consent not to be unreasonably withheld)” or similar
  • Finally, any clauses which are difficult to understand, or which use legal terminology which is not in common use, or words which have a specific legal meaning which may not be understood by the ordinary person (such as ‘indemnity’), will also be vulnerable to being found invalid under the regulations

Here is an example of how this can work. Many landlords would prefer to prohibit pets from their properties and would like a clause in the agreement saying this. However if the clause just says “The tenant is prohibited from keeping any pets whatsoever”, this clause will actually be void, and it will not stop the tenant from keeping pets.

To make the clause valid, it should say something like “The tenant is prohibited from keeping pets, save with the landlords written permission which shall not be refused unreasonably”. You may say, “this is silly, there are no circumstances under which I will allow pets and this is just encouraging tenants to have them”.  However, a clause in this format is not saying you have to give permission.  There are many excellent reasons for refusing permission for pets - that they damage the property, that some people are allergic to them, or that your own lease with the freeholders prohibits pets.  If you gave one of these reasons it would be difficult for the tenant to argue that you were being unreasonable and your refusal of permission would stand.

Unless you are familiar with landlord and tenant law, it is very easy to breach the regulations and render clauses invalid by inexpert adaptations.  Professionally drafted tenancy agreements sold by reputable publishers and associations will normally have been drafted by lawyers with these regulations in mind.  Note also, that from time to time new cases may be decided or new guidance issued by the OFT which will need to be reflected in the form of tenancy agreements. Make sure that the agreements you use are the most recent versions issued by the publisher, company or association concerned, and do not use old precedents. In particular you should never use a tenancy agreement which was drafted before 2002. 

See OFT website for Guidance on Unfair Terms in Tenancy Agreements.

>> Making an inventory and schedule of condition

If you are renting a property, having an inventory (sometimes also called a statement of condition) is essential if your property is let furnished, and a very good idea even if it is unfurnished. This will protect your position and provide evidence to prove the condition of the property at the time it was let to the tenant.

Care should be taken when drafting your inventory. Make a detailed list of all the belongings and furniture provided when a tenant first moves in.  It is also a good idea to record the condition of such things as walls, doors, windows, and carpets etc. The list should be agreed with the tenant before they move in and a separate copy of the list held by them. This should then be checked again at the time the tenant moves out. 

The condition of the furniture including existing damage to the furniture and fittings, decorations and other contents should be noted on the inventory and agreed with the tenant.

Photographs are often a good idea, particularly with high value furnishings, however the use of digital photographs is not always accepted by the courts as evidence; it is advisable to print the photographs and for both the landlord and tenant to sign and date the photographs as an accurate image. With some very high value properties, landlords and agents are now also taking videos. 

A thorough and detailed inventory will help avoid disputes, particularly those involving the return of a deposit. It is advisable to keep all receipts and to make a record of the meter readings in the inventory. Remember that if there is a dispute over the condition of the property and this goes to court, it is the landlord who has the ‘burden of proof’ not the tenant. 

Taking an inventory is a long job and many landlords now use professional inventory clerks to do this for them. The advantage of this, if a dispute over the condition of the property ever goes to court, is that they will be able to give independent evidence to the Judge. You can find an inventory clerk via the Association of Independent Inventory Clerks.

>> Setting the rent

The landlord should agree with the tenant the rent and arrangements for paying it and, if required, arrangements for reviewing it, before the tenancy begins. The details should be included in the tenancy agreement.

If the tenancy is for a fixed term, the rent given in the agreement will last for the whole of the fixed term unless there is a rent review clause. Note that rent review clauses are subject to the Unfair Terms in Consumer Contract Regulations 1999 and clauses which simply say (for example) that the landlord can increase the rent to whatever figure he things appropriate, will be void.

Rent reviewed should be referable to something independent and external such as the retail price index.

>> Rent book

A landlord is only legally obliged to provide a rent book if the rent is payable on a weekly basis (where failure to provide a rent book is a criminal offence). The rent book provided must, by law contain certain information. Standard rent books for assured and assured shorthold tenancies can be obtained from law stationers and larger general stationers. However, the landlord should also keep a record of rent payments and provide receipts for rent paid (particularly for cash payments) for all tenancies to avoid any disagreements later.

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