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Landlords renting out property need to make sure that they have a robust tenancy agreement in place regardless of the tenancy type. Tenancy agreements are usually quite long and difficult to put together if you’re doing it from scratch. It can be tempting to use a standard template that you never change, but this can leave you vulnerable to breaches or disagreements.
In this article, we’re going to look at how you can create a reliable tenancy agreement without years of legal training. Just being aware of standard clauses and unenforceable clauses can go a long way to building a robust tenancy agreement. We’ll also look at the pros and cons of standard templates and how best to use them when you don’t want to start with a blank piece of paper.
Oral vs Written Tenancy Agreements
Most tenancy agreements are written down and signed by both parties in much the same way a contract is executed, but oral tenancy agreements are also legally acceptable.
The clear advantage of a written tenancy agreement is that it acts as evidence of what both parties have agreed as each party should have signed it. With an oral agreement, any disputes that arise over what was initially agreed upon are far more difficult to settle. In an oral agreement, both parties have rights, but they are difficult to enforce.
Even if you’re renting to friends and family, you should ensure you use a written tenancy agreement. It may be the case that you want a more relaxed agreement, but it is possible to do this in writing rather than orally. A written agreement provides protection for both parties in the event of a dispute.
Different Types of Tenancy Agreement
There are different types of tenancy agreements depending on what your rental situation is and which country you’re renting in. The most common type of tenancy agreement is the Assured Shorthold Tenancy (AST). There are different types of tenancy agreements for HMO, commercial and other types of tenancy. These are very well covered in a previous article we’ve written:
The type of tenancy agreement you use may also depend on which country you’re in. England, Wales, Scotland, and Northern Ireland have slightly different legal systems, so contracts and tenancy agreements may differ between countries.
To make sure that you’re creating a reliable tenancy agreement you should make sure you’re using the correct type of agreement for your tenancy and the country your rental property is in. Failure to do this can, in some circumstances, make the tenancy agreement, or at least parts of it, unenforceable.
What Should a Tenancy Agreement Cover?
There are certain details that each tenancy agreement should cover. Once you’re confident you have the correct agreement for the correct country you should at least ensure the tenancy agreement contains clauses that establish the following:
Contact Details for the Tenant and Landlord
The tenancy agreement is essentially a contract, so it needs to be clear who the contract is between. Contact details for the landlord should be included in the tenancy agreement as should contact details for the tenant. It is also a legal requirement for landlords to provide their contact details to tenants for the serving of notices. This language is often used in the agreement around the landlord’s details. If the tenancy agreement is a joint one between two or more tenants, then the names and contact details of each tenant should be listed.
Rent Payments and Tenancy Type Details
In the tenancy agreement you should list the amount of rent that has been agreed and the frequency and if applicable the date the rent payments are due. For instance, rent payments may be due monthly on the 10th day of the month. This prevents any future disagreements over the agreed rental payment amount as both the landlord and the tenant will have signed to agree to this figure and payment schedule. If you have any penalties for late rent payments or if you also include a grace period of a few days in instances where rent is late, you should include this in your agreement. You should also stipulate what kind of rental agreement it is i.e., Assured Shorthold etc.
Tenancy Deposit Details
The tenancy agreement should detail how much deposit is required from the tenant and how it will be protected. There are three UK deposit schemes for you to choose from. You can learn more about these deposit schemes in this article:
You should let the tenant know which scheme you are using. This allows them to make inquiries about the scheme if needs be and allows them to be on the lookout for the deposit certificate.
Length of Tenancy
A lot of standard AST agreements last for a year, meaning that at the end of the year the tenancy needs to be renewed. This usually gives the landlord a chance to review the rent and, if they require re-possession of the property due to no fault of the tenant, they used to be able to serve a Section 21 notice at this time. However, rules are changing now and so the standard lengths of tenancy and the ability to serve a Section 21 are very much in flux at the moment.
The key thing to note is that it is possible to change the length of the tenancy. If you have a tenant who’s been with you for a number of years you may want to offer them a much longer term contract, alternatively, if you’re letting to students, you may want to offer shorter term.
The Responsibilities of the Landlord
Landlords are responsible for keeping the property in good working order. This is a legal requirement in most cases. The tenancy agreement should detail these responsibilities, so the tenant knows where the line is drawn between the landlord’s responsibility and the tenant’s responsibility. A tenancy agreement usually stipulates that the landlord is responsible for the building and its structural integrity. The agreement can also stipulate that the landlord is responsible for utilities (where these are included in the rent) or for communal areas (if there are any in the building). So, when building a tenancy agreement, you should always read over the landlord responsibilities section to ensure the responsibilities apply to you or to include any responsibilities that are not covered.
The responsibilities sections are very important in the instance of any dispute. If a responsibility that’s in question is not mentioned in the tenancy agreement, it is more difficult to settle a dispute. For instance, if a tenancy agreement doesn’t list who is responsible for keeping the garden weed-free, and the landlord then tries to deduct money from the deposit to cover the costs of weeding at the end of a tenancy, the tenant can dispute the deduction because they weren’t made aware that this was one of their responsibilities.
The Responsibilities of the Tenant
Similar to the section above, the tenant’s responsibilities should be included in the tenancy agreement. This means the tenant knows what they are responsible for during the length of the tenancy. This usually involves keeping the property clean, maintaining the garden, keeping windows clean, keeping the property aired to prevent mould from condensation, reporting any maintenance issues to the landlord in a timely manner etc. This section has to be crafted carefully because you are not able to make the tenant responsible for anything that is legally your responsibility. For instance, if you were to put into the tenancy agreement that the tenant is responsible for boiler maintenance, and you later tried to claim from the deposit to cover boiler maintenance, the tenant would dispute this, and the dispute would be settled in their favour.
Similar to the landlord responsibilities section, this section is very important. If you leave any of the tenant’s responsibilities out of this section, it may be unclear in the case of a dispute whether the tenant should have been reasonably expected to know that something was their responsibility.
What Happens at the End of the Term
The tenancy agreement should cover what happens at the conclusion of the term of the tenancy. Usually, this states that the agreement is renewed or, where this isn’t the case, the agreement lapses into a rolling agreement. A break clause should also be included. This allows the tenant or the landlord to end the agreement provided a specific amount of notice is given. Break clauses don’t have to be included but they are common. In this section, the notice period for ending the tenancy agreement should be defined.
Optional Clauses you Should Review in any Tenancy Agreement
Now we’ve covered the things your tenancy agreement should contain, we’ll take a look at some clauses that are optional. When you get a template tenancy agreement these clauses may be included as standard, but not all landlords will want to include them. Some may take them out completely or tweak them.
Including or Excluding Pets in your Tenancy Agreement
Many standard tenancy agreements exclude pets, but some landlords don’t mind pets or will accept certain types of pets. If using a template, you should review this section and adjust it to fit your own views on pets in your rentals. The government has recently made a push for more landlords to allow pets in their rentals, but this is not a legal requirement. If you’re undecided, our post on pets in rentals may help you to decide:
Stipulate Whether your Tenants can Decorate
Decorating is usually a landlord’s responsibility, so you can’t require your tenant to do this, but some tenants, especially long-term tenants, want to know if they can decorate to their own tastes. This is down to each landlord’s discretion. There are arguments for and against which we delve into in more detail here:
Regardless of your opinion on the topic, you should stipulate in the tenancy agreement what your tenants can and can’t do. This can include decorating, but not using dark colours, or not using blue-tack and Sellotape on painted walls. It could be that you allow tenants to decorate how they like but require them to return the property to its original condition at the end of the tenancy. If you’re not just going for a blanket ban on all decoration (which we don’t’ recommend) then you should put as much information as possible into your agreement about what your tenant can and can’t do to the décor.
Make it Clear who the Bill Payer is
If you’re bundling in bill payments with the rent, then the tenancy agreement should stipulate that you are responsible for bill payments and specifically which ones you are responsible for. If the tenant is responsible for all bills, then this should be stated in the tenancy agreement along with which bills they are responsible for. Some landlords also request evidence that gas, electric, and council tax have been paid at renewal or end of tenancy, or both. If you request this evidence, then it is good practice to mention this in the tenancy agreement.
Include a Clause on Sub-letting in Your Tenancy Agreement
Most tenancy agreements prohibit sub-letting as it means the landlord doesn’t have clear oversight of who is in the property at any given time. Many mortgage lenders and insurers also prohibit sub-letting within their agreements. Whether you agree to sub-letting or not, this should be covered in your tenancy agreement.
Joint and Several Liability
If you are renting to more than one tenant, for instance, a couple or a group of students, you may want to include a joint and several clause. This means that if one of the people named in the tenancy agreement decides to leave the property, the remaining tenants are responsible for paying their portion of the rent or for finding someone else to take their place. This is usually more common in student lets.
Landlord’s Right of Access
While the law states that you have to give a tenant 24 hours notice of an impending visit, you should include further details around this in the tenancy agreement. You should stipulate how much notice you will give if you visit. The law states 24 hours but you can extend this if you like. You should also include details of what will give rise to a visit, such as inspections, and how frequently these types of visits will be conducted. You should also include in the tenancy agreement that you have the right to enter the property with no notice in the event of an emergency. It is best practice to stipulate what is considered an emergency. For instance, emergency repairs, or reports of flooding, fire, etc. Remember this has to be reasonable, so you can’t stipulate in the agreement, for example, that if there were reports of noise, you’d enter the property with no notice.
Rent Abatement
Including this clause in your tenancy agreement allows the tenant to suspend rent payments in the event that the property is uninhabitable, for instance, due to fire. This clause can detail what you determine to mean uninhabitable, but this can be disputed if it seems unreasonable.
Noise and Disturbances
If you have any specific noise rules you may want to enter them into the tenancy agreement. This can enforce quiet hours during a specific time of the day, for instance, if you let to shift workers and they need quiet during the mornings to catch up on their sleep. Or you can prohibit loud music coming from the property etc. There can be many reasons for restricting noise in your rental properties but remember any clause dealing with this has to be reasonable or it will be unenforceable. For instance, you can’t require that tenants have to be silent 24 hours a day!
Smoking
Many landlords ban smoking in their rental properties. If you want to ban smoking in your property or designate a specific smoking area, you should include a clause that covers this. In this clause, you should also make it clear that the tenant will be made responsible for any remedial action that needs to be taken to put the property right if a tenant or any guest has been smoking inside.
Conducting Business in the Rental Property
Many insurers and mortgage providers include clauses in their agreements that prohibit business to be carried out on the premises of a residential property. Where this is the case with your mortgage provider or insurer you should ensure that you include a clause in the tenancy agreement to prohibit your tenants from doing this. This usually applies to non-administrative businesses. Non-administrative businesses are seen as a higher risk because they usually involve storing inventory or requiring clients to visit the property. This puts the property at higher risk from theft, liability claims, property damage etc.
You should consider allowing administrative or work from home scenarios as these don’t come with additional risks. If in doubt check with your insurer or lender. If you decide to exclude business from being conducted in your rental property you should include this in the tenancy agreement alongside what is and isn’t acceptable from a business perspective.
Anything Restricted or Prohibited by your Mortgage or Insurance
A few times we’ve mentioned things that are usually prohibited by insurers or mortgage providers – such as sub-letting. The restrictions can differ from company to company. Before settling on your final tenancy agreement, re-visit your insurance and mortgage agreements and ensure that anything they prohibit, that is relevant to the tenant, is covered in the tenancy agreement. For instance, if your insurer includes a clause that limits their liability in the event of a fire if explosive materials are kept in the property, you should include a clause in your tenancy agreement that prohibits explosive materials from being stored in the property.
Should you use a Template for Tenancy Agreements
As you can see from this article, there is a lot to consider when making sure your tenancy agreement is sound. So, writing one from scratch is not recommended unless you are legally trained, and you enjoy writing legalese.
It is fine to use a template for your tenancy agreement. What’s important is that you don’t just accept the agreement unchanged, and you take the time to read through it and make sure it covers the things you need it to. You can change certain clauses to meet your own requirements. You can also delete clauses if they aren’t relevant to you, for instance, if there’s no parking with/for your property and the agreement includes wording about a parking space, you can delete that.
Do be careful when deciding what to delete though, it’s better to keep something in that isn’t relevant than to delete something that may actually be useful later. You can also include clauses that may not be covered in a standard agreement. As long as they are enforceable and reasonable, you should include any clauses that are relevant to you.
Remember that a tenancy agreement isn’t just something you hold your tenants to. It is a contract between two parties, so you can be held to it as well. You should make sure that you’re happy not only with the standard clauses, but that you’re also happy with the roles and responsibilities that are defined as well.
Un-enforceable Clauses in Tenancy Agreements
There have been instances of landlords creating tenancy agreements with clauses that are unenforceable. While it may be tempting to include things in tenancy agreements to mitigate your responsibilities or restrict tenants’ rights, it isn’t enforceable. As an example, you couldn’t include a clause in the tenancy agreement that states you will seize the tenant’s possessions and sell them to cover unpaid rent. It is unlawful to seize a tenant’s possessions and including this in an agreement, even if a tenant signs it, won’t make it legal.
There are a lot of unenforceable clauses you could include in your agreement, so it would be foolish to try and list them all! However, there are some key things that you should avoid in your tenancy agreements to avoid making parts of them unenforceable.
Restriction of Rights
You should not include clauses that restrict a tenant’s legal rights or their rights in general. For instance, you can’t include a clause that says you can visit the property with 20 minutes’ notice, or that you can enter the property with no notice if you believe the tenant is in breach of their contract. Clauses like this are not enforceable. Similarly, you can’t include a clause that says it is compulsory for tenants to purchase tenant’s insurance, the tenant has a right to decide whether they want to purchase insurance to cover the items that they have an insurable interest in, but you can’t insist that they do this in your tenancy agreement.
Fees
You cannot use the tenancy agreement to require the payment of fees, particularly if they are unreasonable or unlawful. For instance, you couldn’t include a clause in the tenancy agreement that says the tenant will pay an administrative fee for any changes that need to be made to the tenancy agreement.
Limitation of Liability
You can’t use the tenancy agreement to limit your own liability. For instance, you couldn’t write into the tenancy agreement that the tenant is responsible for fixing any roof tiles that fall off the roof – this is a landlord’s responsibility, and it can’t be limited via the inclusion of a clause in the tenancy agreement.
These are the key things to watch out for, but they are by no means a comprehensive list. If you want to include an unusual clause that you’re not sure about, seek legal advice.
Tenancy Agreements Used by Letting Agents
Some landlords will use letting agents, where this is the case, they will likely have their own tenancy agreement that they use as standard. While it is tempting to leave this down to the agent, the terms of the agreement still apply to both you and the tenant, so it makes sense to understand what is in any agreement that your letting agent sends out on your behalf.
If using a letting agent, request a copy of the tenancy agreement they use and make sure you’re happy with the clauses included. If you want to make any changes, you can send a revised copy back to the letting agent and ask them to use this as a template for all your lettings.
Seek Legal Help on Tenancy Agreements When You Need it
While we’ve tried to be exhaustive in this article, we can’t possibly cover it all. There are so many types of tenancy agreement, and the law differs in each country, so it’s hard to encapsulate every scenario. With that being said, make sure that if you’re in doubt to seek legal help and advice. It’s better to create a robust tenancy agreement that protects both you and the tenant than to leave it down to chance and find it hasn’t provided you the support you need.
