Due to increased demand for rental property throughout the pandemic, more people than ever before are looking to become tenants. However, they are met with a myriad of tenant rental agreements which can be confusing.
In this article, we break down the jargon to make selecting your next property as simple as possible.
Although there are many different types of tenancy agreements, we have listed the most common:
- Assured Shorthold Tenancy (AST)
- Excluded Tenancy (Lodging/Sharing facilities with the landlord)
- Assured Tenancy
- Non-Assured Tenancy
- Regulated Tenancy
- Company Let
Assured Shorthold Tenancy (AST)
Most tenant rental agreements will by default, become an AST agreement. If the property is residential, the tenancy began after 1989, the landlord does not live in the property and the property is to be the tenant’s main place of occupation, it is likely to be an Assured Shorthold Tenancy.
This type of agreement usually comes with a number of benefits for tenants. These include a fixed period where rental costs cannot be increased. Once this term comes to an end, the agreement transfers to a rolling month-by-month contract.
A landlord offering this type of tenancy agreement has multiple obligations they must abide by.
- The tenant’s deposit must be protected by a government-approved deposit protection scheme such as the DPS (Deposit Protection Scheme)
- The landlord must follow a stringent eviction process if they wish to remove a tenant.
- The landlord is obligated to provide a recent gas safety certificate, a copy of the property EPC (Energy performance certificate), and a copy of the Government’s ‘how to rent guide’, if the agreement was signed after October 2015.
Excluded Tenancy (Lodging)
If the landlord lives in the same property and makes use of the same facilities as the tenant, it is known as an excluded tenancy agreement.
The rights of the tenant are reduced under this type of tenancy agreement. The use of a deposit protection scheme is not a requirement of the landlord, and there is not always a fixed term at the start of the agreement.
Commonly, the rental period will run on a month-by-month basis. Where this is the case, a landlord is required to provide the tenant with a month’s notice if they wish to evict.
Assured Tenancy is one of the most secure tenancy agreements, due to the long-term security it provides tenants. However, it is rarely used in today’s property market.
An assured tenancy can apply to a shared home if each tenant has their own room, and the tenants will be using the room as their main place of occupancy for the duration of the agreement.
While this type of agreement is more secure for tenants who abide by the law, it can be removed should the occupants take part in any criminal activity or are found sub-letting.
There are two main types of assured tenancy
- Periodic Tenancy – The tenancy agreement length has not been agreed upon by the landlord and tenant.
- Fixed Term – renting of the property will begin with an agreed-upon fixed term, commonly between 6 and 12 months.
This form of tenancy was widely used before 1989 and was intended for long-term agreements.
Tenants under this agreement were entitled to fair rents, which was to be decided on by the Valuation Office Agency. For a landlord to increase rent, they would apply for permission to the VOA.
Due to the lack of flexibility for landlords and tenants, this type of rental agreement is rarely used today.
Non-Assured Shorthold Tenancy
Usually, this type of agreement is only used where an Assured tenancy agreement cannot be put in place. An assured tenancy agreement cannot be used in certain circumstances including:
- The landlord is charging rent at less than £250 per year (also known as peppercorn rent)
- The landlord shares the property with the tenant, but not the facilities. (An annexe is the perfect example of this)
Under this type of agreement, the landlord does not have to use section 21 or section 8 to evict a tenant, but the tenant has the right to stay until the initial fixed term has passed.
Company lets are commercial in nature and are used by large corporations. Landlords looking to let this type of property will often look to secure tenancy of the property over several years.
This type of agreement provides security to both the tenant and landlord.
It is common practice for the agreement to have break clauses, in case of a change of circumstance for either the landlord or the tenant.
Selecting a tenancy agreement that suits your circumstances can be challenging. M A S O N S are on hand to offer expert assistance which will help you to make the decision that is best for your requirements.
M A S O N S is one of Hertfordshire’s leading lettings agencies. We offer an award-winning letting experience for landlords through highly flexible and quality property management services covering Hitchin, Letchworth, Fairfield Park, Stotfold, Biggleswade, Stevenage, Welwyn Garden City and Hatfield.