A Landlord’s Guide to Tenancy Agreements
Finalised a tenant and ready to seal the deal but not sure how to structure a tenancy agreement? Then, you’re in the right place. A well-crafted tenancy agreement is key to a smooth rental experience, protecting your property and making sure neither you nor your tenant gets the short end of the stick.
This guide covers everything you need to know, from common mistakes to an effective tenancy agreement template that fosters a profitable and positive relationship with your tenants.
Why are tenancy agreements important?
If you’ve been a landlord for a while now, you may have encountered all kinds of tenant issues like unpaid rent, property damage, or tenancy disputes. A tenancy agreement saves you from all those troubles avoiding disputes and legal headaches.
How? A tenancy agreement is a formal contract between a landlord and tenant that sets clear terms for renting residential or commercial property and keeps all essential terms and supporting documents in one place.
Common mistakes in tenancy agreements
Before we jump into what you should be doing, let’s clarify things that you absolutely should NOT be doing when crafting a tenancy agreement.
Relying on a verbal agreement
In the past, a handshake might have sealed the deal, but these days, a verbal agreement can lead to legal issues. A written tenancy agreement ensures clarity for both you and your tenant.
Choosing the wrong type of agreement
Different properties need different regulations and protections. For instance, residential tenancy agreements cater to tenants’ rights whereas commercial consider business needs (this guide focuses on residential properties).
Using vague terms
Avoid generic clauses that leave room for misinterpretation and disputes. The more specific you can be about rent, maintenance, and responsibilities, the less likely you’ll face disputes later.
Unfair terms
Try to think from both parties’ perspectives to keep things fair. Consider clauses that cater to both your expectations from the tenant and tenants’ rights to avoid legal disputes.
Not planning for potential issues
Your agreement should outline steps for handling unforeseen issues like late rent payments or access to the property for repairs to ensure tenants are aware of their responsibilities and the consequences if these expectations aren’t met.
Ignoring changing regulations
Make sure your tenancy agreement aligns with changing UK laws to avoid fines or legal complications. For instance, the Renters’ Rights Bill, brought about a shift from Assured Shorthold Tenancies (ASTs) to periodic tenancies. Alongside the limitation of rent hikes to once a year only with approval from the tenant.
To learn more about this, check out our blog, “Renters Rights Bill 2024: Key Insights for Landlords.”
What should be in a tenancy agreement template?
Now that we have our bases clear, let’s look at what you should be adding to your private tenancy agreement template:
Party details
Include the property address, landlord and tenant names, signatures and contact information. This makes these details accessible in case of disputes or emergencies.
Rental and Deposit terms
Remember to protect the tenant’s deposit in a government-backed scheme within 30 days. Clearly outline the rent amount, due dates, payment methods, late fees, and the conditions under which the deposit may be withheld (e.g., for damages). This can be useful in cases of regaining possession of your property.
Safety and Compliance
For you, your property and your tenants’ safety, UK law mandates regular safety checks and certificates for rental properties, including:
- Energy Performance Certificate (EPC) with a minimum rating of E (rising to C in 2025)
- Annual gas safety certificate
- Electrical Installation Condition Report (EICR)
- Smoke detectors on every habitable floor
- Carbon monoxide alarm where there are combustion appliances (e.g. wood burners or gas boilers)
- Housing Health and Safety Rating System (HHSRS) to ensure the property is free from hazards like dampness, mould, fire risks, and trip hazards.
Inventory Reports
While not a legal requirement, an inventory report is highly recommended. This includes photos and details of any furniture or appliances before your tenant moves in to prevent deposit disputes when damage occurs from the tenancy’s end.
Licencing and Permissions
Certain properties like Houses in multiple occupations (rented by 3 or more tenants from different households sharing facilities), may require specific licences from local councils.
Additional terms
Based on your discussions during tenant screening, you can customise the tenancy agreement template with additional clauses tailored to your needs. For example, you might add a “tenant decoration clause” or “alteration clause” to prevent tenants from painting walls or hammering nails into the walls without permission. You can also include terms related to early termination, notice period or associated fees for ending the tenancy early.
Additionally, you could clarify responsibilities for minor repairs not covered by the landlord’s legal obligations. It’s also helpful to set rules for subletting or having lodgers, making it clear whether tenants can rent out part of the property or share it with others.
How Pink Elephant can help?
Navigating tenancy agreements can be tricky, but with Pink Elephant, you can rest easy knowing that we ensure clarity, fairness, and compliance in every agreement to foster a sustainable landlord-tenant relationship. Start your property management journey with us, and you won’t have to worry about a thing.
FAQs
Do all tenants need to be on the tenancy agreement?
Yes, the names and details of all the tenants over the age of 18 alongside their signatures are required on the tenancy agreement.
How to get out of a tenancy agreement?
Check if your tenancy agreement already includes a break clause, which usually requires a notice period of 28 days or two months before leaving. If not, consider negotiating an early exit with your landlord.
Can a tenancy agreement be used as proof of residence?
Yes, a tenancy agreement can be used as proof of residence in the UK.
What’s the difference between a tenancy agreement and a lease?
In the UK, a “tenancy agreement” usually refers to residential rentals, while a “lease” is often for commercial properties or residential rentals over three years.
Please note: The information provided here is for general guidance and should not be taken as legal advice. Always consult with a legal professional to ensure your tenancy agreements comply with current laws and regulations.