Tenancy agreements - Beginners guide for landlords

Tenancy Agreements – Beginners Guide for Landlords & Property Investors

Tenancy agreements are an essential component in the life of any buy-to-let landlord or property investor… or at least they should be. If you are a landlord or you rent residential property to tenants then it’s important that you are familiar with the basics of tenancy agreements, how they operate and how they work to protect the rights of both landlords and tenants.

Investment Property Partners beginners guide for landlords and property investors covers the most of the basics of tenancy agreements, what information should be included in an agreement, tenant deposits, the rights of both landlords and tenants, and how to end a tenancy.

New Landlords & Property Investors

Renting private property has always been popular in the UK and with increasing numbers of people struggling to get on to the housing ladder and finding it difficult to get a mortgage, more and more are looking at renting as an option – as it is sometimes the only solution left open to them.

From a buy to let landlord’s perspective, it is extremely easy to get involved in the private rental sector – but only if you are familiar with the law relating to tenancy agreements, your legal obligations, the correct procedures to be followed; and you understand the ins and outs of the private rental market.

If you are an investor thinking of becoming a buy-to-let landlord, or you are new to the whole private renting process, it may help you to research the area thoroughly first to ensure you do everything by the book.

There are plenty of reference sources available that can help including many local and national landlords associations.

What are Tenancy Agreements?

If you already own a portfolio of residential properties that you rent to tenants and you need to improve your landlord processes and procedures, you should start with your most important legal documents, your tenancy agreements, and either learn how to draw up a good tenancy agreement yourself or have a solicitor draw one up for you.

A fair, well written tenancy agreement will help protect both your interests and those of your tenants.

It is vital that there is a written document in place so that should there be any landlord-tenant disputes further down the line both parties have some kind of formal documentation to refer to.

What Information Should be Included in the Tenancy Agreement?

As a basic guideline, you should always ensure that the following important information is included in any private rental tenancy agreement:

  • Details of Both Landlord & Tenant

    Personal details, including names of the people involved in the tenancy.

  • Rental Deposits

    Details of the rental deposit and amount required.

  • Rent

    Rental amount, and when and how often the rent should be paid.

  • How to Pay Rent

    Methods for paying the rent.

  • Start Date & Term

    Start date and term of the tenancy.

A tenancy agreement will also include such things as landlord and tenant commitments and obligations; who is responsible for repairs; and whether sub-letting is permitted.

It is also likely that other things will be included in the agreement to make it personal to both the landlord and the tenant.

Agreeing the Terms & Conditions of the Tenancy

It is important that both the landlord and tenant are present to sign the tenancy agreement once it has been drawn up so that if there are any discrepancies, or if there is something that cannot be agreed upon, it can be sorted well before the start of the tenancy period.

Both the tenant and the landlord should always keep a copy of the tenancy agreement as it could be used as evidence at a later date should you wish to clarify the original understanding of the tenancy terms and conditions.

Getting Legal Advice

Even though as a landlord you are able to include your own terms and conditions in the agreement, it is important that you are fair to both parties… always remember to be fair and make sure that the agreement is legal and meets current standards.

Also make sure it covers the points we’ve listed above and clearly highlights all rent payment details and any rental deposits required.

If you talk to many established landlords and property investors they’ll tell you that they don’t write the tenancy agreements themselves; instead they use a qualified legal professional, a solicitor to help draw up the agreement on their behalf.

Finally, as a tenant if you do not like or agree with any of the conditions laid out in the landlords tenancy agreement, you are well within your rights to postpone signing until you get legal advice.

If this is the case our recommendation is not to delay, but to legal advice as soon you can.

Rental Deposits – How Much?

After an agreement has been drawn up and signed off, the landlord and a tenant must then decide on how and when the rental deposit will be paid.

A rental deposit is required by nearly all landlords as it protects them should a tenant drop out at the last minute, causes damage to the property, does not pay their bills, or ups and leaves the without paying the final rent installment or informing the property owner.

However, if a tenant decides simply to leave the property for a new home and the original property is left in a good condition and all payments are up to date, a landlord should return the rental deposit back to the tenant in full.

The size of the rental deposit will vary depending on individual landlords and the type of property the tenants will be renting.

As a general rule though however, a tenant can expect to pay one month’s rent (sometimes one and a half) as a deposit.

What about Rental Deposit Schemes?

As a landlord you need to bear in mind that, once you have taken the tenants rental deposit you must then protect that money with one of the government-approved tenancy deposit schemes listed here:

This is to protect both the tenants’ cash and protect the interests of the tenant.

As a landlord you are also obliged to let your tenant know that this has been done.

From that point on, both the tenant and the landlord should be sorted in terms of paperwork.

Changing the Terms of Tenancy Agreements

But what happens if tenancy agreements need changing?

There are many reasons why agreement agreements may need to be changed.

From a tenant’s point of view, you may wish to ease the rental payments by getting someone to live with you to share the rent.

If you want to do this you will first need to clear it with the landlord, and if given permission, you will need to arrange for the tenancy document to reflect this change in circumstances.

And from a landlord’s point of view, you may wish to make certain alterations to who should be living there etc.

From a peace of mind point of view however, an tenancy agreement cannot be changed without the consent of all parties… the landlord and the tenant.

So there is nothing to fear with regards to someone making alterations that you may not know about.

How to Legally End a Tenancy

Finally, what if you want to end a tenancy agreement?

Whether you are a tenant or a landlord there are a number of reasons why you would want to end a tenancy agreement.

In order to end an agreement correctly however, you must understand and then follow the correct procedures that are in place to safeguard both landlords and tenants rights.

For instance, there are certain criteria that must be met when giving notice to quit.

It is also important that you understand your legal rights so that you can play everything by the book.

  • Ending a Tenancy as a Tenant

    We’ll start by looking at ending a tenancy agreement from a tenant’s point of view.

    If you wish to move out of the property you have been renting, it is only fair that you give your landlord plenty of notice so that they can advertise the property to other would-be renters.

    As soon as you know that you plan to leave the property, you should inform your landlord, and this can either be in person or in a letter or written document.

    If you do let your landlord know in person however, you are still advised to put it in writing to avoid any misunderstandings, and also as evidence for both you and the landlord.

    This written confirmation helps to clarify what has been said and also forms an excellent reference document if required at a later date.

    Always check your tenancy agreement before you decide you are leaving the property as it will probably include the notice period that you are legally obliged to give the landlord.

    If you do not have a fixed term tenancy and are instead on a rolling tenancy you may be able to give notice at the end of the rent period.

    You should also know that you may be expected to pay the landlord compensation should you end the tenancy early (before the tenancy agreement ends) and there is nothing in the contract that covers this event.

  • Terminating a Tenancy as a Landlord

    Finally, what if you are a landlord and you want to terminate a tenancy?

    Again, just like the tenant, you should inform your tenants of your intentions as soon as possible.

    The type of notice period however, will depend on the kind of tenancy that is in place.

    Also like your tenants, a landlord must notify the relevant persons in writing that they wish to end the rental agreement.

    The landlords’ written letter must detail when the property needs to be vacated and the very latest day that a tenant can live in the house.

    Most tenancy agreements are different but the “done thing” is for a landlord to give around two months prior notice for a tenant to leave the property.

    Of course should you be trying to end a tenancy early because of a breach of the agreement that could include a tenant regularly missing rent payments or because they are not meeting the terms of the agreement.

    Under such circumstances different rules will apply because the tenant will have broken the terms set out in the tenancy agreement.

    Instances where you as a landlord may legally be entitled to prematurely end the term would include the tenant being behind with their rent by several weeks, the tenants’ persistent breach of terms and conditions previously agreed, and using the property for illegal or immoral purposes – to name just a few.

    Under such circumstances it is often prudent for a landlord to seek specialist legal advice as to the correct procedures to be followed and the various stages the lease termination process will follow.

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If you are a property investor searching for commercial property, residential buy to let or overseas property investment opportunities please contact us today to discuss how Investment Property Partners can help you.

Further reading…

More information about tenancy agreements… here →

More information about tenancy agreements and rental deposit protection… here →