The Different Types of Tenancy Agreements

The term ‘tenancy’ can sometimes be somewhat confusing to fully comprehend and can even become overwhelming when you realise that there is more than one type of tenancy agreement.

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But what is a tenancy agreement ?

A tenancy agreement is a contract between a tenant and a landlord. It may be written or verbal. The tenancy agreement gives certain rights to both of these parties.

It is generally a vast document specifying the various aspects of the relationship that will form between the landlord and the tenant.

Given that, it is pretty clear that a landlord should have a tenancy agreement in place, the only trick is to understand the different ones available. With so many different options in the renting world, from long and short term leases to the number of tenants, there is no one-size-fits-all solution. The same goes for tenancy agreements. Fear not, though. We’ve put this comprehensive guide together that details everything you need to know about tenancies.

What is included in a tenancy agreement?

There is no set structure that a tenancy agreement should follow, but there are a few points that are common in a good agreement. These include but are not limited to:

  • The property address
  • Address of everyone involved in the tenancy
  • The price of rent
  • How this rent will be paid
  • The deposit amount
  • The scheme where the deposit will be registered
  • Suggested terms of the tenancy
  • Notice periods (for both tenants and landlords)
  • Rights and obligations for both parties
  • A clause that allows the landlord to take possession of the property if the tenant does not follow rules
  • Any special arrangements, for example pets and subletting

While these are the main points to include, tenancy agreements can always be modeled. As part of listing free with Mashroom, you also get a tenancy agreement that you can customise.

Why do you need a tenancy agreement?

Whilst a tenancy agreement isn’t a legal requirement, it is certainly encouraged; having one in place allows for a sense of security for both the tenant and the landlord. Without this written agreement, both parties stand to lose out on certain rights, such as a landlord being able to claim possession of their property. Issues with the deposit could also arise for tenants if a legally binding contract is not in place.

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A tenancy agreement also means that the landlord is dedicated to providing a good service to the tenant and that they care about their rights. It also sets out any particulars about a specific property. Essentially, it takes the guesswork out of the renting process.

There are several options for tenancy agreements in the UK depending on the type of let between the landlord and the tenant. These include:

  1. Assured shorthold tenancy
  2. Statutory periodic tenancy
  3. Tenancy-at-will
  4. Excluded tenancy
  5. Company let
  6. And a regulated tenancy.

It’s important to understand what each of these types of tenancy agreements are, so that you can make the right decision about which is best for you. So let’s take a look at what each option means for you and your tenant.

What is an assured shorthold tenancy?

An assured shorthold tenancy is the most common type of rental agreement. If the property in question is in the Private Rental Sector, it is likely to be an assured shorthold tenancy (AST). An AST covers the majority of long-term renting, including the details between the landlord and tenant(s). Most ASTs are for an initial six to 12 month fixed term.

During this time period, landlords are not able to raise the rent and are required to protect the tenant’s deposit in a government-approved deposit scheme. This type of tenancy agreement is usually used when the property is the tenant’s primary residence and the landlord does not live there themselves. However, if the landlord charges over £100k, less than £250 a year, or the property is used as a holiday let, an AST cannot be used.

What is a statutory periodic tenancy?

This type of agreement comes into effect when the minimum term of the AST comes to an end. A periodic tenancy offers the same security as an AST but without the fixed-term contract. It comes into play if the tenant or the landlord, for whatever reason, does not wish to commit to another fixed-term contract, but is happy to go ahead month by month.

Tenants are required to give the landlord at least one month’s notice if they wish to leave the property and landlords are required to give tenants at least two months’ notice if they wish for them to vacate the property. Landlords can also raise the rent once in a 12-month period, but are required to provide at least one month’s notice.

What is a tenancy-at-will?

A Tenancy-at-Will is an agreement between the tenant and the landlord that can be terminated at any time. As there is no contract or lease involved. More often than not, there is no written agreement. This type of tenancy agreement is favoured by tenants and landlords who want more flexibility, as it does not oblige you to remain in a long-term contract.

Usually in the UK, a tenancy-at-will is used for commercial letting rather than residential.  Landlords tend to prefer to operate on a Statutory Periodic Tenancy for shorter term lettings.

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What is an excluded tenancy?

If a landlord is renting out part of their home to a tenant while still living there themselves, an Excluded Tenancy Agreement is a potential option. This type of agreement takes away some of the tenants rights For example, landlords are not required to protect the tenants’ deposit in a government-approved scheme and are also able to evict their tenants without giving notice (provided they stick to the rules drawn up in the Excluded Tenancy agreement).

What is a company let? 

In some cases, landlords decide to rent their properties through a company rather than directly to the tenant. If this is the route taken, it is unlikely that the agreement will be an AST, and therefore, similarly to Excluded Tenancy, tenants can lose some of their rights. The landlord is also able to provide a ‘notice to quit’, which stands in the place of a typical eviction notice.

What is a regulated tenancy?

A regulated tenancy is uncommon these days, but it does still exist. These types of long-term tenancy agreements hark back to renting in the UK before 1989 (when ASTs were introduced). A fair rent was set by the Valuation Office Agency.

You’ll now know which type of tenancy is best for you and your situation, and what you should include. All that’s left is finding the perfect tenant for your property.

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