Background

Once you have identified an acceptable tenant and all the references have ?checked out?, the next stage is to get them to enter into a tenancy agreement. Do I need to bother with a formal agreement? Well the short answer is actually no. You may be surprised to discover that you can grant a tenancy verbally; providing the following conditions are met:

∑ it takes effect on the day it is granted

∑ it is for a term not exceeding 3 years, and

∑ it is at the best rent which can reasonably be obtained without a premium being taken (one off capital payment for the beneficial interest of the lease)

However, I would never recommend this, even if it is to a friend or relative. This is because the enforcement of possession or alteration of the terms is more expensive without the documentary evidence of a tenancy agreement, because accelerated proceedings are not available. Please note accelerated possession proceedings, do not mean fast!

Advantages of a tenancy agreement

Generally a tenancy agreement is beneficial for both parties and therefore they are used in almost all cases. As a landlord you know that you have a tenant for a certain period of time, normally 6 months with an Assured Shorthold Tenancy (AST). In return the tenant has a basic security of tenure during which time they cannot be ?booted out?, unless they stop paying the rent. It is worth mentioning before going on, that in law two or more persons are described as ?a tenant?. Therefore, even when there are a number of separate tenants occupying a property under a single agreement, legally they are referred to as the tenant (singular).

The current legislation originates from the Housing Act of 1988. This heralded the deregulation of residential tenancy law by introducing two new types of tenancy; the Assured Tenancy (AT) and the Assured Shorthold Tenancy (AST). Prior to these, residential lettings were largely governed by the provisions of the 1977 Rent Act. This archaic bit of legislation had been yet another nail in the coffin of the private rental sector. It saddled landlords with tenants that had security of tenure (i.e. virtually impossible to get them out).

The reform of the tenancy legislation in the Housing Act of 1988 was in many ways the beginning of the ?buy-to-let? revolution. It dispelled, hopefully for ever, the spectre of rent restriction and unreasonable levels of security of tenure. These two factors were largely responsible for the continued decline of the private letting sector. The 1988 Act was subsequently amended by the 1996 Housing Act. This updated procedures and made it even easier for landlords to let property without the worry that they would be unable to get their property back at the end of the term.

The assured tenancy

As I have already said it is possible to create a tenancy without a formal agreement. However, a tenancy agreement is useful. It sets out in clear terms the rights and responsibilities of both the landlord and tenant. If disagreements arise then this agreement will be useful in settling disputes which may ultimately go as far as the Courts. What types of tenancies are there and what are my rights and responsibilities as a landlord?

There are two main types of tenancy concerning the letting of residential property:

The Assured Tenancy (AT) and the Assured Shorthold Tenancy (AST).

Don't be fooled by the similarity in their names. The two types of assured tenancies are very different animals.

The AT gives a tenant extensive security of tenure. This means that at the end of the agreed term the tenant does not have to leave, having the legal right to stay unless the landlord can establish grounds for possession. ATs also allows tenants the right to have their rent referred to the Rent Assessment Committee if they consider it to be excessive. This type of tenancy was set up largely for tenants wanting greater security of tenure. For most landlords and tenants it is not suitable. This is because from a tenant's perspective one attraction of renting is that it offers short term flexible accommodation. Whilst what a landlord wants; is to be able to charge a market rent and obtain vacant possession quickly and easily.

For these reasons the vast majority of tenancies are Assured Shortholds. Prior to 28th February 1997 all tenancies were Assured Tenancies (AT) unless a notice was signed to indicate an AST. The undoubted popularity of the AST over its? more restrictive ?cousin? meant that from the 28th February 1997 this situation reversed and all assured tenancies automatically become shortholds unless otherwise stated.