How to Create the Right Tenancy Agreement

12 September 2021

A tenancy agreement is a contract between you and your tenants. It sets out the legal terms and conditions of the tenancy. It can be written down or oral.

A tenancy can either be:

  • fixed-term (running for a set period of time)
  • periodic (running on a week-by-week or month-by-month basis)

The Housing Act 1988

Under this Act, two types of tenancies can be created: assured tenancies and assured shorthold tenancies (ASTs). ASTs had to be created by serving a prescribed notice under Section 20 before the tenancy began, stating the tenancy would be an AST. If not, the tenancy would be an assured tenancy. ASTs could not be created for less than six months.

Assured Tenancies

The key points of an assured tenancy are:

  • It gives the tenant more protection if the landlord seeks possession
  • The tenant can stay in the property unless the landlord can prove grounds for possession
  • The landlord needs to seek possession of the property using a Section 8 Notice (a section 21 notice cannot be used)

An assured tenancy can be periodic or fixed term, If periodic it will usually run from month to month.

Assured Shorthold Tenancies (ASTs)

The key points of an AST are:

  • It is created automatically and does not need any formal notice or procedure
  • It gives limited security of tenure to the tenant
  • The landlord can use either a section 21 Notice or a Section 8 Notice to seek possession
  • There is no minimum time period for the tenancy

An AST can be periodic or fixed term. If periodic it will usually run from month to month.

Most ASTs are for a fixed period which can be any length but the most common is 6 or 12 months.

If you need a free AST Agreement you can get one here:

https://www.mudhut.com/patron/tenancy-agreement

When to Use an Assured Tenancy or AST

In order to create an assured tenancy or AST, the following criteria must be met:

  • The tenant is an individual, not a company, charity or trust
  • The property is the tenant's main home
  • The landlord is not a resident landlord
  • The rent does not exceed £100 000 a year

An AST is the default type of tenancy and can be created verbally and still be legal tenancies. Of course, it's advantageous to both to the landlord and tenant to have the tenancy documented by a tenancy agreement.

Other Types of Tenancy

The Housing Act 1988 excludes certain types of letting from the protections offered by assured tenancies and ASTs, for example:

  • Lettings to companies
  • Holiday lets
  • Lettings by resident landlords
  • Rents over £100,000 a year
  • Not the tenant’s main or principal home
  • Premium leases
  • Agricultural tenancies
  • Rent Act 1977 tenancies

Situations such as the ones above are known as Non-Housing Act 1988 Tenancies and will need to be covered by a different agreement.

Categories: Residential Lettings Best Practice Legal Aspects of Lettings