How to create a legal and binding tenancy agreement

Regular readers will know that we’re serious about tenancy agreements. So serious, in fact, that we don’t offer landlord insurance to people without them.

A tenancy agreement is a legal and binding contract between you and your tenant(s). It sets out, clearly and without room for misinterpretation, what is expected of the landlord, the tenant and the length of the agreement. It also details what either party is able to do should the other break the terms of the agreement.

Without a tenancy agreement in place, landlords and tenants have no written record of the agreement to refer back to resulting in a diminished legal footing should a disagreement or dispute occur. Tenancy agreements are about protecting the legal rights of both parties and everyone benefits from having one in place. 

That said, there’s sometimes confusion around what constitutes a legal and binding tenancy agreement, what should be included, and which type is best to use. In this post, we’ll clear up a few of these questions and tell you everything you need to know to create a tenancy agreement you can depend on.

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What is an Assured Shorthold Tenancy?

The majority of private rented sector (PRS) landlords will use an Assured Shorthold Tenancy (AST), which is the default legal category of residential tenancy in England (Wales is changing to this soon, while Scotland uses Private Residential Tenancy agreements). 

There are other kinds of tenancies, but since the majority are ASTs we’ll focus this article on them. Certain kinds of properties, such as HMOs, may also have different tenancy agreement requirements.

The basic principle is that, provided the tenant complies with the terms of the contract, their tenancy is protected for the agreed period. Once this period is over, the landlord is entitled to get their property back. 

ASTs can only be used by private landlords or housing associations and the landlord can’t live in the property that they’re renting. The rent has to be above £250 a year and below £100,000. GOV.UK has more detailed information on the criteria for ASTs on their website.

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What’s the minimum criteria for a legal tenancy agreement?

Your AST should capture, in plain and unambiguous language:

  • The names and contact details of the landlord and tenant(s)
  • The amount of rent to be paid, when and how often it will be collected
  • The total deposit to be paid and how that money will be protected
  • How long the tenancy will last for, and any break clause
  • The rights and responsibilities of the landlord and tenant(s)
  • The criteria for ending the tenancy

 

What happens when an AST runs out?

Most new ASTs last for six months to a year. You can choose to offer one for as little or as much time as you want, although this is considered unwise, unless you add in a break clause. Six months to a year gives landlords the flexibility to take back possession using a Section 21 notice within a reasonable timeframe should they need to.

When the fixed term of the AST runs out, and the tenant remains in the property without a new or renewed contract, a periodic tenancy will take effect.

The terms and conditions for the periodic tenancy are the same as the original tenancy agreement and can continue indefinitely. However, the landlord can now regain possession of the property once the correct written notice has been provided. 

A useful piece of advice from Landlord Law is to be specific about the exact start and end dates in your tenancy agreements. Avoid saying things like ‘for six months’ or ‘for one year after the move in date’. Instead, specify the exact dates that the tenancy agreement starts and finishes.

Get a legally binding tenancy agreement

Landlord Action offers a tenancy document drafting service

Should I use a tenancy agreement template?

If you do choose to use a template, make sure it is from a trusted source, like GOV.UK

Some landlords may choose to adapt or add clauses to a tenancy agreement to tailor it to their property. If you are adding your own clauses, you may wish to seek legal advice. Added clauses that are not legally enforceable or considered fair may land you in trouble under Unfair Contract Terms legislation

Keep in mind that Landlord Action can help with drafting AST agreements and other legal documents. 

How to create a legal and binding tenancy agreement

Can you change a tenancy agreement?

A tenancy agreement is a contract, which means it can’t be changed without both parties agreeing to those changes and signing an updated contract or making written changes to the existing contract. Generally, signing a new contract is considered better as there’s less room for misinterpretation.

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Can you end a tenancy agreement early?

There are a few different reasons you may want to do this.

The simplest of these is that both parties agree to end it early, for whatever reason. If this happens, it’s best to capture in writing at the time what the reason was and that both parties are OK with ‘surrendering’ their agreement. 

A ‘break clause’ allows the landlord or the tenant to end the tenancy early provided that sufficient written notice has been served beyond a given date. For a 12 month contract, a break clause of six months may be included. The exact notice period, the terms of the break clause and how it can be activated must all be included in the tenancy agreement.

The only way you can end a tenancy early without a break clause is if the tenant has breached the terms of the tenancy agreement. 

Typical examples include falling behind on rent, intentional damage to the property or inappropriate behaviour towards other residents. The landlord will initiate this termination by providing written notice via a Section 8 notice.

When it comes to drawing up tenancy agreements, it’s always better to be safe than sorry. Understanding the legal rights and responsibilities of both parties and how the tenancy agreement supports those things is important. A dismissive approach to your tenancy agreement can leave you with a reduced legal footing in the event of a dispute. 

A legal and binding tenancy agreement is a great starting point, but for total peace of mind, you want to know that you’re covered for any eventuality. Hamilton Fraser Total Landlord Insurance offers comprehensive buy to let cover at a reasonable price. Get a quote today to find out how much you could save.