7 tips for formatting a tenancy agreement
Article Posted - 8th March 2019
Until you delve deeper, many people think that agreements are all the same, but it is possible to adapt your agreement to suit your needs. More importantly, if you're not doing this you could make life harder for yourself down the road.
How can I make my tenancy agreement work for me?
While some landlords review the wording of their tenancy agreements yearly, or whenever a tenant leaves, others use the same template year after year. Having an up to date tenancy is important to help your tenants understand their responsibilities and to protect your interests. It can also provide reassurance that you will deliver on your verbal agreements and fulfil your obligations. NLA's model tenancies are regularly reviewed and updated to reflect the law, best practice and members' feedback.
1. Choose the right agreement
When letting to individuals you should use An Assured Shorthold Tenancy (AST) in England and Wales and a Private Residential Tenancy (PRT) in Scotland. If you are letting to a company, charity or are a landlord letting out a room in your own home the rules are different. The options are summarised in the NLA Online Library.
2. Learn how to respond to change
We recommend that all adults living in the property are named on the tenancy. If you are letting to sharers and one person wants to leave, you can change the people named on the tenancy using a Deed of Assignment. In other circumstances it can be safer to negotiate surrender of the original tenancy and issue a new one to all occupiers. This could include an individual wishing to move in their partner or an adult family member returning to live at home on a permanent basis. The best approach will depend on the individual circumstances. If you are unsure what to do, members can speak to the NLA Telephone Advice Line.
Other variations will depend on the wording of your tenancy agreement. If your tenant wishes to set up business, have pets or sublet a spare room, the agreement will usually require your tenant to ask your permission. If you are happy to give your consent you can agree additional terms and conditions, these would usually be agreed as an addendum to the tenancy or through exchange of letters.
A clause that expressly prohibits a tenant from setting up a business, having pets or subletting is deemed to be an unfair term and would be unenforceable. You are however perfectly within your rights to refuse a request if there are reasonable grounds to do so.
3. Factor in pets
The issue of pets has been very topical this year following a ruling that said landlords were placing unreasonable conditions on pet-owning tenants. As always there are two sides to this argument, and we advise landlords to make decisions on a case-by-case basis. There are many landlords who are happy to let to respectful and responsible pet-owning tenants. Make sure you clearly stipulate in your agreement the requirements and standards you expect, and ensure you have a clearly laid-out inventory. There is no one-size-fits-all agreement. Adapt your agreement to suit you, your tenants' needs and the type of pet. You can find out more about letting to tenants with pets on our blog.
4. Anticipate rent increases
In England and Wales, we recommend that you include a rent review clause in your AST – especially if you have a fixed term tenancy. If there is no clause then you will only be able to increase the rent when the AST becomes periodic, using a Section 13 Notice. The wording of this notice is set out in law, there is a different one for England and Wales.
In Scotland you must include a statutory rent increase clause in your PRT. When proposing to increase the rent you must use a Section 22(1) Rent Increase Notice.
Where-ever your property is based you must follow the correct process when proposing a rent increase. In Scotland the rules are much stricter than England and Wales. The correct rent increase notices to use can be found in NLA Forms.
5. Protect the deposit
Every time you grant a new AST or PRT you must protect the deposit if you take one and give your tenant the relevant prescribed information.
Refer to the terms and conditions of your chosen deposit protection scheme first to make sure you do this right. The law in England, Wales and Scotland is different, and the various deposit schemes which have their own separate rules.
6. Choose tenancy length carefully
In Scotland the PRT is open ended. It is not possible to grant a fixed term tenancy.
In England and Wales landlords will typically grant an initial six or 12 month fixed term AST and then allow it to continue on an open ended or ‘periodic' basis. The NLA AST allows the tenancy to continue a contractual periodic basis, this is designed to protect you from potential liability to pay council tax. If your tenancy is silent on what happens at the end of the fixed term, you can allow it to continue a statutory periodic basis.
It is important to be open minded and be flexible to your tenants needs. Families will often seek a minimum of a year, students may only want to be locked in for the academic year.
7. Think carefully about large HMOs
If you have multiple people living in one house or building consider the impact the tenants with have on each other. For example people working night shifts may not want to share with day workers. One disruptive tenant can cause several good tenants to leave, if the situation is not managed.
In this scenario in England and Wales, an initial 6 month fixed term may be your most appropriate option. In Scotland this is not possible.
Whenever choosing new tenants, seeking references and finding out about your tenants (can they afford to pay the rent? Where do they work? Etc) can help you decide whether they are suitable for the shared house or bedsit.
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