The Importance Of A Tenancy Agreement

Tenancy agreements can help you avoid some of the problems and penalties that can afflict landlords who don’t take proper care. A well-drafted agreement can end up saving you a lot of money and heartache! 

It is not actually necessary to have a tenancy agreement to create a tenancy. 

So long as your fixed term is less than three years, you can create a perfectly valid tenancy just by handing over the keys and collecting the rent once your tenants have moved in.

However, not having a tenancy agreement is a very bad idea for a number of reasons, starting with:

– Tenants will be entitled to pay rent in arrears rather than in advance – as that is their right if there is no provision for rent in advance;
– You will not be entitled as of right to make deductions from your tenant’s deposit – as this is the tenants’ money and not yours.  The only reason most landlords can make deductions is that the tenants have signed an agreement authorising this;
– If you don’t have a special forfeiture clause in your agreement you will not be able to evict tenants, at all, during the fixed term of their tenancy.

If you’re still unsure, here are some other things tenants will be able to do as of right if there is no clause in your agreement to stop them:
– Keep a pet;
– Re-decorate the property how they like;
– Sublet to lodgers or Airbnb ‘guests’ (which could put many landlords in breach of their mortgage or lease);
– Change the utility supplier without telling you.

You need to know however that those last four items (keeping a pet, etc.) will also be something tenants can do if your clauses are not properly drafted.

Under the unfair terms rules (now part of the Consumer Rights Act 2015) where you are taking away a right a tenant would normally have – your clause needs to provide for the tenant to ask for permission to do whatever-it-is and say that permission will not be unreasonably refused or delayed.

Many landlords totally fail to understand this and (in particular) invalidate the pet prohibition clauses by removing this wording.  Thereby giving the tenants carte blanche to have whatever pets they want!

You should not tamper with a professionally drafted tenancy agreement unless you know what you are doing!

However, there is more than just stopping tenants doing things you don’t want.  You can also put in clauses which help you comply with the law and protect you if your tenants do something which would normally make you vulnerable to prosecution.

A prime example of this is to nail down exactly who is allowed to live in your property, to protect you under:
– The HMO regulations;
– The Right to Rent check rules.

If you have rented out your property to four tenants sharing – specifically so your tenancy will not become liable for mandatory licensing, you really do not want your tenants bringing someone new into the property.
This would bring the property into scope for HMO licensing, therefore making you liable to penalties and prosecution from the council.
Neither do you want the Home Office bringing a prosecution or fining you because they learn that someone is living in your property who does not have any right to rent in the UK.

The way you protect yourself against both of these situations is to name in your agreement everyone who is entitled to live there – whether as a tenant or as an authorised occupier (often called ‘Household Members’) and then say that no-one else is allowed to live in the property.

So, if the tenants move someone else in, they will be in breach of the agreement giving you the right to bring injunction or eviction proceedings for default.
Plus, the Home Office can hardly fine you when you have right to rent-checked all authorised occupiers if the illegal occupier they have discovered is unauthorised by you.

Another different thing you can do is specify that tenants must notify you if they are going to be leaving the property empty for more than X days – where X is the period of time your insurance will provide cover for your property when it is vacant.

You will then, if they tell you they want to take a holiday of a lifetime trip for six weeks where your insurance policy provides for 28 days, be able to arrange for additional cover.

If they don’t tell you and because of this your insurers refuse cover for something, you will have the right to pass this cost onto your tenants as compensation for their breach of contract (quite an important point in favour of the importance of a tenancy agreement).

In order to help landlords, LandlordLaw offer a comprehensive course which looks at all the things that landlords need to know and explains them in a plan English style (i.e. without a lot of lawyers waffle and jargon).

In order to make it easier for you to learn it includes:
– A special pdf version you can download and print off;
– Audio versions of the text you can listen to in your car or while walking the dog;
– Video clips to explain specific points;
– Explanatory diagrams;
– ‘Test yourself’ questions at the end of most sections.

There is also the option to buy a +Plus version with extra documents.

The course is in seven parts and you can read all about it here.