The key to managing the different issues that arise in the landlord and tenant relationship is having a clear and thorough tenancy agreement. Most landlords in England will be using a form of AST (Assured shorthold tenancy). If you are a landlord and you source your own tenants you will also want to have a secure audit trail of your tenancy agreement.
But what does this mean for landlords? Lauren Woolf, Legal Adviser at DAS Law, tells you what you need to know…
What do I need to put into my tenancy agreement?
A valid and well thought through tenancy agreement should include ‘standard’ term such as:
- The details of all parties to the contract (i.e. landlord and tenant);
- The rent value and how often this should be paid;
- The deposit value and how this will be protected;
- Details on when the deposit can be partly or fully withheld (i.e. if the tenant causes property damage);
- Details on how and when the rent will be reviewed;
- The property address;
- The start date of the tenancy and the duration of the fixed term (an AST must be for a minimum term of six months);
- All obligations of the landlord and the tenant;
- An outline of bills that the tenant is responsible for;
A tenancy agreement may also provide for the following:
- If a tenancy can be ended early and how this to be done. This is more commonly referred to as a ‘break clause’.
- Who is responsible for minor repairs (another than those repairs that the landlord is legally responsible for),
- Whether or not a tenant can sublet or have lodgers.
- A forfeiture clause. This is a clause allowing the landlord to end the tenancy during a fixed term by serving a Section 8 notice. Without this clause, a landlord cannot end a fixed term tenancy.
All of the tenancy terms above would be referred to as ‘expressed terms’ which means that they are actually written in a tenancy agreement. Tenancy agreements also have ‘implied terms’ that are not set out in the agreement. Implied terms could include the following:
- The landlord’s obligations to carry out basic repairs. For example, repairs to the structure of the property and keeping installations for the supply of gas, electric, water, space and water heating in working order. Landlords also have a duty to follow fire safety regulations and ensure all smoke alarm and carbon monoxide alarms are working.
- The tenant’s right to peaceful enjoyment of the property without nuisance caused by the landlord.
- The tenant’s obligation to use the property in a responsible manner. I.e. not causing damage to the property by using fixtures and fittings properly and keeping the property in a good condition.
- The tenant’s obligation to allow access for necessary maintenance and repairs.
- The landlord’s obligation to ensure a property is ‘fit for human habitation’.
What do I need to be especially wary of?
Landlords in Wales are obliged to comply with The Housing (Wales) Act 2014. Part 1, schedule 4 of this act requires all landlords with property in Wales to register with Rent Smart Wales and either to be licensed themselves if they are ‘self-managing’ or use a licensed agent. From 23 November 2016, all landlords have been required to register.
All landlords are able to register online; you simply need to create an account and follow the online process. This application needs to be completed by a landlord themselves rather than an agent or any other person.
A landlord who contravenes this requirement is committing a criminal offence and is liable to a fine not exceeding level 3 which is a maximum of £1,000. Rent Smart Wales can also take enforcement action for non-compliance by giving fixed penalty notices, rent repayment orders and rent stopping orders.
Landlords in England and Wales also have a duty to protect their tenants deposit in a government authorised scheme within 30 days of receiving it. Landlords in England are bound by the Tenant Fees Act 2019 which means the maximum deposit that they can request is the equivalent of five weeks’ rent if the annual rent is under £50,000 and six weeks’ rent if the annual rent is above £50,000.
The ‘prescribed information’ also has to be given to the tenant within 30 days and this includes:
- The address of the rented property;
- How much deposit a tenant has paid;
- How the deposit is protected;
- The name and contact details of the tenancy deposit scheme and details of the dispute resolution service;
- The landlord / agents name and contact details;
- The name and details of any third party that has paid the deposit;
- The events upon which the landlord would seek to keep the deposit;
- How to apply to recover the deposit;
- What to do if you are unable to contact the landlord at the end of the tenancy;
- What to do if there is a dispute over the deposit.
A tenant can make a claim to the county court for the landlord’s failure to protect their deposit. The court can order the landlord to pay up to three times the deposit amount back to the tenant or back into a tenancy deposit scheme account within 14 days.
Landlords in England also have further obligations, particularly for the purposes of ensuring any section 21 notice that they may serve is valid. To ensure its validity, a landlord must give the following document to the tenant:
- ‘How to rent checklist’ – the checklist for renting in England;
- Energy performance certificate (EPC);
- Gas safety certificate.
It is best practise to ensure that these documents are served before a tenant occupies the premises. It should be noted that landlords in Wales must still provide the EPC and gas safety certificate before the tenant occupies the premises.
All landlords should consider carrying out at least a basic credit check on a tenant before committing to a tenancy. This is to ensure a tenant will be able to afford the rent payments and to avoid having to chase late payments or debt collection at a later stage.
Failure to carry out a credit check may also render any landlord or legal expenses insurance void for the purposes of rent recovery.
It is also good practice to ask for reference for the tenant from somebody reputable such as the employer. Some local authorities have tenant accreditation schemes and can advise a landlord as to whether the prospective tenants are recognised as ‘good tenants’. Landlords should also consider whether they need to carry out right to rent checks. This is to ensure any tenant aged 18 and over is legally allowed to rent residential property.
Lastly, a landlord needs to ensure that they do not discriminate against tenants based on their disability, gender, pregnancy or maternity, race, religion, belief, sexuality.
What is the process for finalising the tenancy agreement?
As long as both the landlord and tenant are happy to agree to the terms and the terms are fair, both parties can sign to make the agreement a legally binding contract.
In the current climate, landlords will be keen to rely upon tenancy agreement being signed electronically. Tenancy agreements for a term of up to three years do not need to be executed as a deed and therefore electronic signatures can be used. This facility is available at simplybusinesslaw.co.uk.
As well as the tenancy agreement, landlord should consider preparing an inventory to list any furniture in the property as well as any faults with the property before the tenant moves in. This avoids any disputes around damage or missing furniture from the house and of course the deposit. Once complete, both parties would sign off the inventory.
What could happen if I don’t have a tenancy agreement?
Landlords and tenants still have implied obligations in the absence of a tenancy agreement (i.e. landlord has responsibility for repairs and maintenance of property and tenant would have obligation to pay rent and keep the property in a reasonable condition). However, landlords are very likely to meet obstacles if there is no written tenancy agreement in place. One of the obvious issues is being able to prove any terms agreed by both parties.
One of the major issues in the absence of a tenancy agreement could arise where a landlord is looking to evict a tenant, particularly where a Section 21 notice has been served.
A landlord may be unable to use the accelerate procedure for possession of their property as this a paperwork based procedure. In light of this, a landlord would have to go down the normal possession route. The normal possession procedure will include a court hearing where the landlord will likely have to explain to a judge why there is no written tenancy agreement in place. The court will also determine the validity of the Section 21 notice.
Another issue may arise where a landlord tries to keep all or part of a tenant’s deposit. The tenancy agreement should authorise when such deductions can be made. In the absence of such a clause, a landlord may have to consider court action to recover any financial loss caused by the tenant.
In light of the above, it is vital that tenancy agreements are in writing as not only will this uphold the rights and responsibilities of both parties, it clearly controls the use of the property and clarifies the position of both parties.
Need more help?
DAS UK customers have access to templates and guides on dasbusinesslaw.co.uk.You can access DAS Businesslaw by using the voucher code in your policy provider’s documentation.
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Disclaimer: This information is for general guidance regarding rights and responsibilities and is not formal legal advice as no lawyer-client relationship has been created. Note that the information was accurate at the time of publication but laws may have since changed.