Before setting up the tenancy agreement, it is important to remember that there are different basic types of tenancy for letting your property to a tenant. They differ between jurisdictions and are discussed below.
The 2 basic types of tenancy in England and Wales are:
Note that a tenancy will not be an assured or assured shorthold tenancy if:
This is a less common form of tenancy. A landlord does not have the automatic right to repossess the property after the tenancy comes to an end and can only regain possession if he or she can prove to a court that certain statutory grounds for possession apply.
Assured shorthold tenancies
This is the most common form of tenancy. An assured shorthold tenancy is automatically created if the parties do not state what type of tenancy agreement they wish to create. It allows a landlord to regain possession of their property after a minimum period of 6 months from the beginning of the tenancy, as long as the tenant has received a valid notice giving at least 2 months' notice of the possession date (known as a 'section 21 notice').
You can charge a full market rent for an assured or an assured shorthold tenancy.
Which tenancy should I use?
If you believe that you may require possession of your property after some time then you should choose an assured shorthold tenancy. If you have a mortgage then you may have to choose an assured shorthold tenancy if the terms of the loan require it.
If you are looking to let the property indefinitely then you should consider an assured tenancy, but you may want to take legal advice before making such a decision as possession can only be regained under certain circumstances.
This law guide only applies to tenancy agreements created since the 1 April 2007 in Northern Ireland.
In Northern Ireland, there is only one type of residential tenancy agreement that can be granted. This tenancy agreement covers furnished and unfurnished lettings.
The 2 basic types of tenancy in Scotland are:
1. Entered into or resulting from a contract made before 2 January 1989;
2. No rent or a rent of less than £6 a week is chargeable, or its monthly or yearly equivalent is less than £6 a week;
3. The tenancy concerns a house which is also a shop or is licensed to sell alcohol for consumption on the premises;
4. The tenancy concerns a house which is let together with more than 2 acres of agricultural land;
5. The tenancy concerns a house which forms part of an agricultural holding and the house is occupied by the person responsible for farming the holding;
6. The tenancy concerns a letting by a university, central institution, or other specified educational institution for a student pursuing a course of study there or at another specified educational institution;
7. The tenancy concerns a letting for a holiday;
8. The landlord is a 'resident landlord'. (The meaning of a 'resident landlord' is briefly that the landlord's only or main home must, immediately before the tenancy starts, and at all times during the tenancy, be in the same building as the house or rooms which the tenant is renting; and there must be a direct access, such as a doorway, between the landlord's part of the house and the tenant's part);
9. The tenancy concerns a letting by the Crown or a government department;
10. The tenancy concerns a letting by a local authority, Scottish Homes or a co-operative housing association;
11. Entered into under a shared ownership agreement; this is a right to occupy the house because of an agreement which does not create a tenancy - for example, because all the accommodation is shared with someone occupying it under a separate agreement. (The difference between a tenancy and some other form of agreement is not always straightforward. Even if the agreement is not called a tenancy agreement it may in fact be one, for example, if a tenant has the exclusive use of one room, possibly a bedroom, but shares all the other accommodation, a tenancy will exist.)
12. The tenancy is provided on a temporary basis for homeless persons.
This is the less common form of the 2 types of tenancy. A landlord does not have the automatic right to repossess the property after the tenancy comes to an end and can only regain possession if he or she can prove to a court that certain statutory grounds for possession apply.
Short Assured tenancies
This is by far the most common form of tenancy. It allows a landlord to regain possession of their property after a minimum period of 6 months from the beginning of the tenancy, as long as the tenant has received a valid notice giving at least 2 months' notice of the possession date. A statutory form known as an AT5 must be served on the tenant before the signing and commencement of the lease otherwise the lease will be an assured tenancy.
You can charge a market based rent for an assured tenancy (in the event this cannot be agreed between a landlord and tenant either party can refer this for a decision to the Private Rented Housing Panel) and a full market rent for a short assured tenancy (there is a right for a tenant to go to the Private Rented Housing Panel if a landlord is charging significantly more than a market rent but this right is rarely used).
Which tenancy should I use?
If you believe that you may require possession of your property after some time then you should choose a short assured tenancy. If you have a mortgage then most mortgage lenders require you to have a short assured tenancy.
If you are looking to let the property indefinitely then you should consider an assured tenancy, but you may want to take legal advice before making such a decision as possession can only be regained under certain limited circumstances.
Before any type of tenancy is granted, proper checks should be made on each of the proposed tenants. Those checks should generally include at least 2 references, one of which should confirm the financial standing of the proposed tenant and whether they can afford to pay the rent. The references can be obtained from a previous landlord, an accountant, an employer or a bank or a building society.
Every tenant is a potential problem and you should make detailed checks before letting them have possession of your property. References may look good on the surface but they could be forged or be exaggerated, so it is recommended that you should not always take them at face value. Where possible, you should consider speaking with the referees. In some cases you should ask for bank statements or get a credit report.
Tenancies starting on or after 28 February 1997 are automatically assured shorthold tenancies unless special steps are taken to set up an assured tenancy. Tenancies which started or were agreed before 28 February were automatically assured tenancies unless a special procedure was followed to set up an assured shorthold tenancy.
How do I set up an assured shorthold tenancy?
Tenancies starting on or after 28 February 1997 will automatically be an assured shorthold tenancy. Tenancies which started or were agreed before 28 February 1997 will be an assured shorthold tenancy only if you notified the tenant before the tenancy began (using a special form called a 'Section 20 notice'), that the tenancy was to be an assured shorthold tenancy.
How do I set up an assured tenancy?
Tenancies starting on or after 28 February 1997 will automatically be assured shorthold tenancies, unless you gave the tenant a notice which says that the tenancy is not an assured shorthold tenancy before the beginning of the tenancy, or include a simple declaration in the tenancy agreement to this effect.
If you decide after the tenancy has started that it should be an assured tenancy, you can serve the notice after the tenancy has started. There is no special form for giving this notice - you simply need to state clearly that the tenancy will not be an assured shorthold tenancy.
Tenancies which started or were agreed before 28 February 1997 were automatically assured tenancies in law even if you had an oral agreement with the tenant that it was an assured shorthold tenancy.
In certain circumstances, you must apply for a certificate of fitness within 28 days of the commencement of the tenancy agreement from the local council for the area in which the property is situated, though this can be applied for in advance of the tenancy agreement. Where the local council refuses to issue a certificate of fitness, the rent can become controlled, which means that the rent will be fixed at a certain amount and the landlord will not be able to charge any more than this. This can be appealed to the Rent Assessment Committee or you can carry out the recommendations of the local council and re-apply for the certificate of fitness. If a certificate of fitness is issued, you are free to charge the rent you want.
See the section on 'Certificates of Fitness' below for further information.
Furthermore, you must, by law, provide the tenant with a statement of tenancy terms and a rent book within 28 days of the commencement of the tenancy agreement - failure to do so is an offence and the local council can take action against the landlord.
See the sections on 'Statement of tenancy terms' and 'Rent books' below for further information.
Tenancies starting on or after 2 January 1989 are automatically assured tenancies unless special steps are taken to set up a short assured tenancy.
How do I set up a short assured tenancy?
To ensure that a tenancy is a short assured tenancy you must, prior to the signing of the lease by the tenants, serve a Form AT5 on them in the prescribed form. Failure to do so will result in the lease being an assured tenancy and give the tenants security of tenure. It is good practice when serving the tenants with the AT5 to get them to sign an additional copy with an acknowledgment typed on it, stating that they received the principal AT5 prior to the signing and commencement of the lease. You should keep this copy AT5 as evidence you complied with this obligation. The tenant should also be provided with a Tenant Information Pack. This explains the obligations on both the landlord and tenant during the tenancy and in what circumstances the tenancy can be brought to an end.
How do I set up an assured tenancy?
Normally, any lease set up after 2 January 1989 and where no AT5 has been properly served will be an assured tenancy.
An assured or an assured shorthold tenancy may be either a:
Assured shorthold tenancy
If you agree an assured shorthold tenancy on a periodic basis, you have an automatic right to possession at any time after the first 6 months, provided you have given the tenant at least 2 months' notice that you require possession. Alternatively if one or more specific statutory grounds for possession apply, you can seek possession at any time before 6 months have expired, in the same way as for a fixed-term tenancy.
If you provide an assured tenancy on a periodic basis you can only seek possession if one or more of certain specific statutory grounds for possession apply.
Although prior to 28 February 1997, you were required to have a minimum fixed term of at least 6 months, this is no longer a requirement. Therefore, there is no minimum duration and periodic tenancies can start from day one.
It is important to note that the tenant has a right to stay in the property for a minimum period of 6 months. This means that even if you agree a fixed term of less than 6 months or a periodic tenancy from the outset, you do not have a guaranteed right to possession if the tenant refuses to leave during the first 6 months of the tenancy. However, you can seek possession during this period if one or more of certain specific statutory grounds for possession apply, such as if there are rent arrears, the tenant has caused a nuisance or annoyance or has been convicted of an offence in or in the locality of the property.
The duration of the tenancy is agreed between the landlord and the tenant, prior to the tenancy agreement being signed. Where the tenancy is a fixed-term tenancy, the landlord cannot gain possession of the property until the fixed term ends; however, the tenant can serve a notice to quit the property, giving at least 28 days' notice at any point during the tenancy term. If the tenant fails to leave the property at the end of the fixed term then the landlord will have to go through the correct channels to regain possession of the property.
If the tenancy is a periodic tenancy, then the landlord can serve a notice to quit at least 28 days before the end of the period (i.e. 28 days before the end of the 6 month period). Again, the tenant can serve their notice to quit at any point during the tenancy agreement. If the tenant fails to leave the property at the end of the notice to quit then the landlord must go through the correct channels to regain possession of the property.
A short assured tenancy must be for a minimum period of 6 months. In practice it is rare for a short assured tenancy to be granted for any other period than 6 months or one year. An assured tenancy can be set up for any period.
If you have a mortgage, it is essential to get your mortgage lender's agreement to let the property before you do so.
If the property has a lease (usually associated with apartments and maisonettes, although in Northern Ireland a large portion of residential dwelling houses built pre-2000 will have a lease as the document of title), you should check its terms to ensure that you have permission to let the property and, if necessary, you should obtain your landlord's or the management company's prior agreement to do so.
You should also check first with your insurers whether your building insurance policy will provide cover if the property is let and make arrangements to extend the cover if it does not.
In Scotland you must also first make sure that you have been registered as a landlord and deemed to be a 'fit and proper person'. Visit thewebsite for more information.
England and Wales
Written tenancy agreements are only required by law for fixed-term tenancies of greater than 3 years, but you are strongly advised to have a written tenancy agreement in any case. This will make it easier to sort out any disagreements which may arise later, and if necessary, to evict the tenant. You cannot use theoperated by the county courts without a written tenancy agreement.
Tenancies for a fixed term which are greater than 7 years should be registered with the local Land Registry office. A tenant with a shorthold tenancy starting on or after 28 February 1997 who does not have a written agreement has a right to ask you for a written statement of any of the following main terms of the tenancy:
If you have only an oral agreement with the tenant, you and the tenant are bound automatically by the legislation applying to shorthold tenancies if the tenancy started on or after 28 February 1997 or by the legislation applying to assured tenancies if the tenancy started or was agreed before 28 February 1997, even if you agreed with the tenant that it was a different form of tenancy.
The position regarding whether or not tenancy agreements must be written is the same as it is in England and Wales. You must provide your tenant with a statement of tenancy terms within 28 days of the commencement of the tenancy. Failure to do so is an offence. You also run the risk of having certain conditions being included automatically "by operation of law" into the tenancy that you wouldn't necessarily have agreed to if you were negotiating them. These conditions relate to things like the landlord and tenant's obligations for repairs, entry and inspection, the term of the tenancy and the length of the notice to quit. It is therefore strongly recommended that you have a written tenancy agreement and that you provide the tenant with a statement of tenancy terms within the requisite period in order that you can maintain full control of the terms of the tenancy.
Tenancies for a fixed term which are greater than 21 years should be registered with the local Land Registry.
It is always wise to have a written tenancy so that both parties are clear on their rights and obligations in terms of the tenancy. There is, however, no obligation to have a written lease. In practice, because of the requirement to serve AT5s to create a short assured tenancy, valid short assured tenancies are nearly always done in writing.
Tenants are entitled to have tenancy agreements that strike a fair balance between themselves and landlords and contain fair terms in plain, intelligible language. The Unfair Terms in Consumer Contracts Regulations 1999 protects tenants from unfair terms contained in a tenancy agreement which favour the landlord. The only exception to this is for price setting terms such as the rent and those which give details of the property and the length of the tenancy, but these must still be in plain and intelligible language.
The Office of Fair Trading has published aon unfair terms in tenancy agreements.
Prospective tenants should be given every opportunity to read and understand the terms of the tenancy agreement before becoming bound by them.
Some landlords use letting agents or estate agents to help find tenants for their property and to perform checks on the proposed tenant's credentials. Some will also collect the rent and provide a full management service so that the landlord will not have to deal directly with the tenants at all. They will charge a fee for their services.
Agents who are members of the Royal Institution of Chartered Surveyors, the Association of Residential Letting Agents, the Incorporated Society of Valuers and Auctioneers, and the National Association of Estate Agents are required to operate to standards recognised by their organisations.
Some housing associations will lease property from landlords for periods of at least 2 years and/or manage the property. They will charge a fee to cover their management costs or deduct the costs from the rental income. They may be able to provide a grant towards the cost of repairs to bring the property up to standard for letting. Your local authority's housing department may be able to give you advice on these matters.
You may ask the tenant to pay a deposit before moving into your property to act as security in case he or she leaves the property owing rent or, to pay for any damage or unpaid household bills at the end of the tenancy. You should negotiate the amount with the tenant. However, in England and Wales if you charge a deposit of more than 2 months' rent, it could be regarded as a premium which may give the tenant a right to give the tenancy to someone else or sublet.
You should state clearly in the tenancy agreement the circumstances under which part or all of the deposit may be withheld at the end of the tenancy.
In England and Wales (for assured tenancies) and in Northern Ireland (for all tenancies), it is advisable to keep the deposit in a separate bank account so that it can be returned at the end of the tenancy unless the conditions for withholding it are met.
In England and Wales for shorthold tenancies, you are obliged to place any deposit received up to the value of £100,000 per annum in a Government-authorised tenancy deposit scheme. There are 2 types of scheme: custodial and insurance-based schemes.
All private residential tenancies in Scotland are subject to a tenancy deposit scheme.
For more information on a landlord's obligation in relation to deposits see:
England, Wales and Scotland
To help prevent disputes at the end of the tenancy when it comes to the issue of the return of the deposit, it is advisable to agree an inventory providing a description and the condition of any furniture, kitchen equipment and other items in the property with the tenant at the outset of the tenancy.
You must provide an inventory of all fixtures and fittings in the property, together with details of their condition, in the statement of tenancy terms which is to be provided to the tenant within 28 days of the commencement of the tenancy agreement. You should also attach a copy of the inventory to the tenancy agreement and include a condition in the tenancy agreement stating that the tenant agrees that all the items listed are in the property and are in the condition stated. It is also advisable to have photographs of the items attached to avoid any disputes as to the original condition when the tenancy agreement ends.
In England and Wales, if the tenant cannot afford the deposit, you can check with your local authority's housing department whether there is a rent or deposit guarantee scheme in the area which would guarantee rent or the costs of damage for a specified period.
England, Wales and Scotland
You are only legally obliged to provide a rent book if the rent is payable on a weekly basis. This must by law contain certain information; you can obtain standard rent books for assured and shorthold tenancies from law stationers and larger general stationers. You should keep a record of rent payments or provide receipts for rent paid for all tenancies to avoid any disagreements later.
You have a statutory obligation to provide a tenant with a rent book within 28 days of the commencement of all tenancy agreements for private lettings - failure to do so is an offence and the local council can take action against you.
Since 1 October 2008 in England and Wales, 30 December 2008 in Northern Ireland and 4 January 2009 in Scotland, it is compulsory to provide an Energy Performance Certificate (EPC) in respect of private rented properties.
The landlord is responsible for ensuring that there is a valid EPC available for prospective tenants. The certificate provides a rating for the building showing its energy efficiency. The ratings are similar to those found on products such as fridges and are standardised, so that the energy efficiency on one building can be easily compared to the energy efficiency on another building.
Each rating is based on the performance of the building itself and its services (such as heating and lighting), rather than the domestic appliances within it. This is known as an asset rating. The certificate also lists the potential rating of the building if all the cost-effective measures were installed.
The ratings will vary according to the age, location, size and condition of the building. The potential rating on the certificate will take these factors into account, and the suggested measures will be tailored so that they are realistic for the particular building.
The certificate also includes a recommendation report, providing information about ways to improve the energy performance of the property. Recommendations include cost effective improvements and further improvements (that achieve higher standards but are not necessarily cost effective). For each improvement, the level of cost, typical savings per year and the performance rating after improvement are listed. The potential rating shown on the certificate is based on all the cost effective recommendations being implemented.
For homes, 2 ratings are shown.
You must provide any prospective tenant with the EPC and recommendation report, free of charge, at the earliest opportunity and no later than:
Building control and trading standards divisions of local authorities are responsible for ensuring that, when required, buildings have an EPC.
There is a penalty charge from £200 up to £5,000 for domestic properties for non compliance and the EPC must still be produced even if the charge is paid.
If you believe that you have been wrongly issued with a penalty, you can request a review. Also, if you are not satisfied with the outcome of the review, you may appeal to the county court within 28 days after you received notice confirming the penalty charge from your local authority.
Once a tenancy is created in Northern Ireland, the landlord must apply to the local council to have the premises inspected in order to determine whether the premises are fit for human habitation by looking at the state of repair within 28 days. If the landlord wishes, they can apply for this before any tenancy commences.
This is compulsory unless:
1. The premises were constructed after the 6 November 1956; or
2. A certificate of fitness has already been issued; or
3. The premises are prescribed under the Prescribed Dwelling-House Regulations (NI) 2007 if:
a. The premises were constructed after 1 January 1945,
b. A renovation grant under Part III Housing (NI) Order 1992 or Part III of the Housing (NI) Order 2003 within the last 10 years,
c. Registered with the Northern Ireland Housing Executive, or
d. A regulated rent certificate has been issued by the local council within the last 10 years
If the local council decides that the premises are not fit for human habitation, they will issue a notice of refusal which the landlord has 21 days to appeal and the tenancy will become a controlled tenancy and will be subject to rent control. Once the rent has been set, the landlord will have 14 days to appeal. If the landlord appeals, the Rent Officer will register the rent determined by the Rent Assessment Committee.
The landlord can bring the premises up to the standard required by the local council and reapply for a certificate of fitness in order to remove the controlled status and enable them to freely set the amount of the rent.
For more information on Certificates of Fitness and controlled rents, you should contact the Rent Officer on 028 9082 9262 or email@example.com. You can read more about the Rent Officer on the.
If you wish to apply for a certificate of fitness or if you are in any doubt as to whether the property you are letting requires a certificate of fitness, then you should contact your local council who will post the forms out to you or you can go to your local council's website where the forms can usually be downloaded.
Under the Private Tenancies (NI) Order 2006, all landlords must provide their tenants with a written statement of the terms of their tenancy within 28 days of the commencement of the tenancy.
The Tenancy Terms Regulations (Northern Ireland) 2007 state that the following information must be included in the statement of tenancy terms:
Under Article 5 of the Private Tenancies (NI) Order 2006, all landlords must provide tenants with a rent book in accordance with the 2007 Rent Book Regulations. This must be provided within 28 days of the commencement of the tenancy agreement - failure to do so is an offence and your local council can take action against you.
The rent book should contain the following information in accordance with the 2007 Regulations: