Different types of tenancy agreements in the UK. Here’s our clear and quick guide for landlords.

Different types of tenancy agreement in the UK

Introduction

There are several different types of tenancy agreements in the UK, but if you’re a buy to let investor, the likelihood is your property will be let on an Assured Shorthold Tenancy (AST) or a Company Let tenancy agreement.  

But what’s the difference between the two, when are they used and what are the important elements of each? Here’s our landlord’s guide with a brief overview of these different types of agreement so you know what these mean for you and your tenant.  When your letting agent has found you a tenant, they will advise you which form of tenancy agreement is applicable for that tenancy.

Assured Shorthold Tenancy 

  • Most new letting agreements in the UK with rent of up to £100,000 per annum (£8,333 per month / £1,923 per week) will use an Assured Shorthold Tenancy (AST). 
  • By law, the deposit paid by the tenant must be logged in a government authorised deposit protection scheme, where the money will be held during the tenancy.   Your Letting Agent can arrange this on your behalf under your instructions.
  • Deposits are capped at 5 weeks rent where the rent is less than £50,000 per annum or 6 weeks rent if the rent is more than £50,000 per annum. 
  • ASTs always start with a fixed term clearly described in the tenancy agreement.  The fixed term us usually twelve months but can be six.   Ending the tenancy during its fixed term can only happen if both parties agree to terminate the contract or if the tenant breaks particular clauses of the tenancy agreement. When the fixed term expires, the landlord can reclaim their property by serving the correct notice to the tenant. The tenant can move out with no obligation to stay past the fixed term.
  • If both parties agree, the fixed term can be renewed.  If no action is taken, the fixed term tenancy automatically converts into a periodic tenancy which is more flexible for both parties. The landlord can reclaim their property by serving a Section 21 notice, giving the tenants two months notice to vacate the property. Any new terms, for example the tenant taking in pets or the landlord increasing rent, must be negotiated and re-agreed using an addendum agreement or a new tenancy agreement which is signed by both parties. 
  • Repairs and maintenance are the responsibility of the landlord.
  • Daily maintenance and care for the property are the responsibility of the tenant. 
  • Landlords can tailor tenancy agreements to suit their needs and those of the tenant, although there are some specific terms (implied terms) that are legally required in every AST.  These include:
    • Tenants have the right to live peacefully in the rental property without unlawful interruption.
    • Tenants must use the property in a respectful way and not purposefully cause damage to fixtures and fittings.
    • Tenants are obligated to provide access for any repair work or property inspections.
    • Landlords must carry out basic repairs, which includes keeping the installations for the supply of water, sanitation, gas, heating and the heating of water in good working order.
A couple receiving keys from an agent.   There are different types of tenancy agreement in the UK, AST's are the most common.

Company Let  (A non-assured tenancy agreement)

It’s not uncommon for employees being relocated for work to have their accommodation paid for by their company.   In this scenario, the following will apply:

  • The employer takes on the residential agreement as the tenant, rather than an individual.  
  • The employee will occupy the property as a licensee of the tenant.
  • A company let is a non-assured tenancy agreement meaning:
    • The deposit does not need to be protected in a government scheme
    • Repossession will usually start with a notice to quite instead of a Section 21 or Section 8 notice
    • The tenant fee ban doesn’t apply
  • It is common for the occupant to pay the council tax and utilities, but the company is fully accountable to the landlord for any default of payments on ant of these costs.
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Non-Assured Tenancy

  • You will use a non-assured tenancy agreement if the annual rental is in excess of £100,000. Meaning:
    • The deposit does not need to be protected in a government scheme
    • Repossession will usually start with a notice to quite instead of a Section 21 or Section 8 notice
    • The tenant fee ban doesn’t apply

Assured Tenancy and Regulated Tenancy

Assured tenancies and regulated tenancies – are different types of tenancy agreement that were used in the past and gave tenants long-term tenancy rights.   You will not use either of these types of tenancy if you are private landlord letting your property today to a new tenant.

We hope you have found this article useful, feel free to comment or ask any questions.  For more information on property investment check out our other articles and request your copy of our Buyers Guides from [email protected]

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