Tenancy agreements – Why you need one

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Tenancy agreements - Why you need oneDid you know its not actually necessary, legally, to have a tenancy agreement

You can create a perfectly valid tenancy on a handshake, handing over the keys and collecting the rent from your tenant (s54(2) Law of Property Act 1925).

The tenant goes in and, bingo – assured shorthold tenancy created. No problem.

Or is there?

Here are three possible problem scenarios

1. Your tenant hands you a cheque for £500 for the first months rent. You say ‘hang on a minute, the rents £600’. He says “Oh yeah? Who says? We agreed £500 mate” How are you going to prove any different? Without a tenancy agreement with the rent clearly stated?

2. You take a deposit for £600 and duly protect it. At the end of the tenancy, you make a claim for the totally ruined carpet in the front room. Your tenant disputes it. It goes to arbitration. You lose. Why? There is no tenancy agreement clause setting out the circumstances under which you can make deductions from the deposit. Oh dear.

3. You decide you want your tenant to go. However, because she wants to be re-housed by the local authority you are told you have to evict her through the courts. You say ‘no problem’ and serve a section 21 notice. Your lawyer points out that you can’t use the accelerated procedure as you do not have a tenancy agreement and so you have to use the other procedure where there is a court hearing. The lawyers bill goes up. Ooops!

It will never happen to me

Now you may be saying “I ALWAYS give my tenants tenancy agreements“.

Good. I’m glad to hear it.

However, it’s something you need to be really careful about because if you let the tenants into occupation before they have signed the tenancy agreement, they can turn around and refuse. You can’t make them sign and as they are already in the property, there is not a lot you can do about it other than evict them, which will take a long time.

So to prevent problems occurring, make it a rule that you will never allow tenants to have the keys and move in until AFTER the tenancy agreement has been signed, by ALL the tenants.

The “letting tenants in on approval” myth

Sometimes people think, mistakenly, that it is possible to allow tenants to move in ‘on approval’ on the basis that if they behave themselves they can be given a ‘proper’ tenancy agreement later. However, this is a myth. As soon as the tenant moves into the property and pays his first rent he is a proper assured shorthold tenant. The only difference is that he is a proper assured shorthold tenant without a tenancy agreement. See the disadvantages listed above.

The situation if there is no signed agreement

So what is the legal situation if, by accident, a tenant does end up in your property without a signed tenancy agreement – and he then refuses to regularise the situation by signing one after he has moved in?

Here are some of the main points:

  • In most cases he will have an assured shorthold tenancy.
  • If rent is payable monthly, he will in most cases have a monthly periodic tenancy
  • You will be bound by the repairing covenants in s11 of the Landlord & Tenant Act 1985
  • You will not be able to evict him from the property other than via a court bailiff after obtaining an order for possession (Protection from Eviction Act 1977)
  • You will be bound by the various regulations such as the gas regulations, as well as the powers exercised by Local Authorities, for example under the Housing Act 2004 relating to the condition of the property

However the tenant will also be subject to various rules and regulations:

  • He will not be able to assign or sublet the property without the landlord’s consent (s15 Housing Act 1988)
  • He will not be entitled to carry out any improvements or alterations to the property without the landlord’s written consent (s81 Housing Act 1980), and
  • He will be under a duty to act in a ‘tenant like manner’ further to the Lord Denning decision in the 1954 case of Warren v. Keen.

None of this can really compensate for the lack of a properly drafted tenancy agreement.

So make sure you have one signed before the tenant goes in!

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Comments

  • Simon Gibbs says:

    Advice required, tenancy in Scotland, tenant took a verbal lease/contract twelve years ago to rent a house with yard on the understanding that it was to be indefinite or a lifetime rent, for the past twelve years landlord and tenant got along well, nothing was ever put into writing. Tenant also runs a business from the premises, at year six tenants spouse became joint tenants, spouse on disability benefits, house was adapted to suit recently. Rent level fair and tenants comfortable. Recently landlord died and tenants were notified that estate of landlord is being wound up tenants asked to vacate property while updating work is done and to re-occupy on same level of rent but entering into a new lease (I assume a short-assured tenancy). Two years ago the tenants were promised no rent increase for five years. Recently original tenants spouse was presented with a document to sign, duly signed no copy was given apparently it was a lease but procedures were not followed, mitigating circumstances will void the signing anyway.

    Any advice please for the tenants please?

    • Are the tenants life renters/sitting tenants/regulated tenants ?
    • Should the tenants stay put and resist moving out for renovations/assessment of building and certificates to be done ?
    • Has the original verbal contract died with the original landlord ?
    • The original verbal agreement may have been with the landlord personally or with their Ltd Company, which is it best to argue for (from the tenants point of view) ?

    Any case law along similar lines ?


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  • Does offering a new AST cancel debt on the last one?

    We have a long standing working tenant who has run into debt, she now wants to add her 30 year old son who is unemployed and will claim LHA paying us to reduce the debt. Problem is HB want a AST for him, do we just give him a contract, or renew the lot which may affect the outstanding debt?


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  • @Don – I’m pretty certain that offering a new tenancy agreement does not cancel out the arrears in the previous one. If I were you though I would be thinking long and hard about offering a new tenancy agreement to a tenant who already has a poor payment history.

    There may be a better alternative – see the comment from Industry Observer in the following linked thread >>> http://www.property118.com/tenants-partner-moving-in-likely-issues/39970/


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  • @Simon I am afraid I can’t make any comment as I am an English solicitor and so only know the law as it is in England. Sorry.
    Tessa Shepperson recently posted…HomeMy Profile


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  • To Simon: try Citizen’s Advice in Scotland. It will depend on the wishes of the will or the beneficiaries I would think but Scottish law is different from English in many important respects including inheritance and property.


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  • Nat Parmar says:

    I have a tenant with whom I am in the process of agreeing a 3 year occupancy agreement at a fixed price which is lower than normal due to the 3 year term.
    Do I have any rights if he decides to leave after 1 year, because he would have saved a fair amount of monthly rent due to the term of the agreement.

    Thank you in advance for your help

    Nat


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  • If he leaves part way through a three year fixed term, unless you include a break clause, he will be liable for the rent of the rent on a month by month basis. He cannot end his responsibility for rent just by moving out.

    So if he wants to go you should remind him of this. You may be able to negotiate some sort of ‘exit fee’ with him.
    Tessa Shepperson recently posted…HomeMy Profile


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  • Nat Parmar says:

    Thank you Tessa


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  • Paul Barrett Member Profile Deleted says:

    Nat Parmar;
    Why bother with a long fixed term AST which won’t enforce your tenant to stay or pay for the full term!?
    Only court recovery action can do that; you’d have to trace them and take them to court…………………………………………………..NOT easy!
    Just issue a normal 6 AST proceeding onto a SPT but add an appendix to it indicating that the rent won’t increase for 3 years which is the expected time that the tenant will vacate by.
    This gives you the ability to evict at anytime without long notice periods.
    It would be unlikely that a S13 rent increase would work due to the appendix.
    It would be highly unlikely that you would bother using the S21 process to evict if you increased the rent via a new AST.
    Very few LL actually get rid of a tenant who pays the rent and behaves in a ‘tenant like manner’
    I would avoid such a long term AST; it would cause many issues for you if things go wrong.
    I have NEVER had to remove a tenant because of slight rent increases.
    They have all vacated as satisfied tenants; well the ones that did pay rent!


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  • @Nat Parmar – do you have a buy to let mortgage on the property? If so be very careful, you may well be in breach of the mortgage terms if you offer a tenancy for more than 6 to 12 months and the lender could call in their loan if they find out.

    There is also some truth in what Paul Barrett is saying if you let to a “no hoper” tenant which he has found out to his great cost. However, my experience is that if you do things properly in terms of professional referencing your chances of having a bad tenant are much lower. For example, you could have an IFA or accountant earning £200k a year and they wouldn’t dare to default and risk getting a CCJ as it would spell the end of their career. The services also come down hard on employees who get themselves into debt.

    My advice would be to turn this around if possible. Is it you who wants a long term deal, the tenant or both?

    Try a Google search for “Deed of Assurance” and read the notes I have left in the comments section regarding my strategy.


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