Types of Tenancies and Rental Agreements

Tenancy agreements come in different forms, have different conditions and obligations. The rules around tenancy agreements are also changing. We have discussed short and long-term lets before, but here we are going to explain more about the types of tenancies and rental agreements you may come across, as a landlord or tenant.

What is a tenancy or rental agreement?

A tenancy or rental agreement is a contract between a landlord and tenant which may be written or verbal. It sets out the terms of a tenancy between the contracting parties. Tenancy agreements are very important documents because they are effectively the rules that the tenant and landlord must abide by during the tenancy. Any dispute that occurs will refer to the terms of the tenancy agreement.

As long as the rent is paid and the rules set out in the agreement are followed, by both parties, the agreement is being met.

Written vs oral tenancy agreements

Most tenancy agreements are written documents. It should be clear what the terms of the tenancy are, with no grey areas if a problem should arise. Written tenancy agreements provide clarity, detail and legal protection for both parties, and help to prevent any misunderstandings.

A tenancy agreement that is agreed verbally between the landlord and tenant, but not written down, is still legally binding. However, in the event of a dispute it becomes much harder to prove anything. You may need to use other forms of communication, like emails or text messages, as evidence.

What different tenancy periods are there and how long is a tenancy?

Fixed term tenancies

A fixed-term tenancy agreement lasts for a set amount of time, typically six or 12 months. There is no maximum length for a fixed-term tenancy but whatever is decided as the length, it must be included on the tenancy agreement, and if longer than three years, signed as a deed.

You cannot give notice to end a fixed-term tenancy early unless there is a break clause in the agreement. Once the original term ends, the tenancy will become periodic and roll on indefinitely.

Periodic tenancies

A periodic tenancy is one with no fixed end date unless the landlord or tenant give notice to end it. This must be done in writing. All fixed-term tenancies automatically become periodic after they end unless the tenant writes to the landlord to say that they do not want to stay in the property. The notice that needs to be given for a periodic tenancy is one month for a tenant, and two months for a landlord.

Assured tenancy

Assured tenancies are no longer very common. They are not to be confused with assured shorthold tenancies. Tenancies starting between 15 January 1989 and 27 February 1997 may be assured but you can also be an assured tenant if you moved in after 27 February 1997 if:

Your landlord gave you a written notice before your tenancy started saying that you have an assured tenancy
You previously had an assured tenancy in the same accommodation with the same landlord

How long is an assured tenancy agreement?

An assured tenancy means a person can rightfully live in a property for the rest of their life.

What are the rules for eviction under an assured tenancy?

Assured tenancy holders can still be evicted. Landlords have to issue a Section 8 notice, and the tenant has to clearly have been in breach of their tenancy agreement.

Assured shorthold tenancy (AST)

Most first tenancies in the private rented sector are assured shorthold tenancies. AST’s came into force after the Housing Act 1988. The hallmarks of an AST are:

The property is private (not commercial)
The tenancy started after 1989
The property is the tenant’s main accommodation
The landlord doesn’t live in the property

Even if a landlord is renting individual rooms within a larger property to tenants who share facilities, an assured shorthold tenancy will be created. However, an AST is not possible if:

Rent is extremely high (over £100k per year)
Low or no rent is being charged
It’s a holiday rental

How long is an assured shorthold tenancy agreement?

Most ASTs will stipulate an initial fixed term of six or 12 months. During this time, the rent cannot be increased unless the tenant agrees to it or there is a rent review clause in the tenancy agreement.

What responsibilities does the landlord have for an assured shorthold tenancy?

Aside from their statuary responsibilities, landlords have to ensure that the tenant’s deposit is registered and protected . The landlord must use a government-approved deposit protection scheme to do this.

Non-assured shorthold tenancy

This type of tenancy can only be used in specific situations, where an AST cannot be used. Examples of when this type can be used include:

When the rent is more than £100,000 per year
The tenant has their main home elsewhere
The landlord lives in the same property as the tenant but does not share the use of any facilities

What responsibilities does the landlord have for a non-assured shorthold tenancy?

Unlike an AST, landlords are not obliged to pay a deposit into a government-backed deposit protection scheme, and a landlord does not have to serve a Section 21 Notice to end the tenancy.

How long is a non-assured shorthold tenancy?

A non-assured shorthold tenancy can be either a fixed term or periodic agreement. A tenant has the right to stay in the rental property until the end of the fixed term, if they comply with the terms of the tenancy agreement.

Excluded tenancy

An excluded tenancy applies if you have a lodger living in your home and share rooms with them, like a kitchen or bathroom. An excluded tenancy usually provides less protection from eviction than other types of agreement, but it still gives rights to the lodger.

What are the rules for eviction under an excluded tenancy?

On a rolling excluded tenancy agreement, lodgers should be given at least 7 days or ‘reasonable notice’ before eviction. You can be evicted peacefully if your agreement has come to an end.

Company let

This type of tenancy does not apply for typical landlords and tenants as it is when a company with a legal identity rents a property to house its equipment or staff.

Property can be rented by a company as a ‘residential tenancy’ which means it ‘lives in it’ through its directors and employees or as a ‘commercial tenancy’ if it rents the property and then sublets it to customers.

As opposed to a traditional AST, a company let is largely governed by common law, because the Housing Act 1988 states that its provisions will exclusively apply to individuals and not companies (Schedule 1, Housing Act 1988).

Regulated tenancy or “protected tenancies”

A regulated tenancy now only occurs in very limited circumstances, but tenancies before 15 January 1989 were regulated under an old piece of legislation, the Rent Act 1977.

Regulated tenancies are sometimes called protected tenancies or Rent Act tenancies and come with strong tenancy rights. They are long-term agreements, and the rent is often far lower than typical values, even for similar type properties.

Statutory/rolling or periodic tenancy

What is a statutory/rolling tenancy agreement?

You may assume that as soon as a tenancy expires, the tenancy automatically terminates. This is not true, and it is where periodic tenancies come into being. A fixed term tenancy automatically becomes a periodic tenancy if new contracts are not signed after the fixed term expires in the original agreement and the same tenant(s) stay in the property. The landlord or tenant do not have to do anything, and a special kind of contract or clause is not required either.

How long is a statutory/rolling tenancy agreement?

The original terms and conditions apply, the only difference is that a new periodic contract begins. It typically will run on a month-by-month basis, hence the term ‘rolling’. These principles apply if the rent is paid on a weekly or bi-weekly basis. Some contracts may also run from quarter to quarter or even year to year.

How can statutory/rolling tenancies be ended?

Like any other type of tenancy, periodic tenancies should only be terminated through proper legal processes. A periodic tenancy will continue until it is terminated by any one of the following methods:

Mutual consent – when both landlord and tenant agree to end the tenancy
Eviction of the tenant by the landlord
Notice given by tenant (this period may be outlined in the agreement but not always; generally it is one month's notice)
Notice by a landlord (a minimum of two months' written notice must be given to a tenant)

Starter tenancy

Starter tenancies are specifically for new housing association tenants. They are effectively ‘trial tenancies’ to establish if a tenant will be reliable, are able to pay their rent and fulfil all their obligations.

How long is a starter tenancy agreement?

A starter tenancy usually lasts for 12 months. If it has been successful it then becomes an assured shorthold tenancy for a fixed term.

Tenancy at will

Tenancies at will are informal arrangements which allow people to live indefinitely in properties but giving them no rights to remain there once the tenancy has been terminated. They are designed for short term occupation, perhaps before a more formal tenancy has been prepared. They usually serve the interests of both parties. The landlord may want to see their property occupied as soon as possible, and the tenant might not want to be committed to a fixed term tenancy.

Tenants are not protected by the Landlord and Tenant Act 1954 with tenancies at will.

Common law tenancy

A common law tenancy is one that falls outside the statuary terms of standard types of tenancies, and is instead governed by the common law. Common law is derived from precedent rather than legislation. You may have a common law tenancy if you fall outside a standard tenant-landlord relationship; for example, if you live in purpose built student accommodation, a temporary homeless shelter or rent from the Crown, military, police or fire service.

A common law tenancy agreement will usually be based on a conventional residential tenancy format, with standard responsibilities for landlords and tenants, eviction rules and notice periods.

How will the Renters Reform Bill change tenancy agreements?

The Renters Reform Bill, the most significant lettings legislation for 30 years in the UK, is due to become law before the end of 2024. One of its key features is simplifying the types of residential tenancies that are available. Fixed term tenancies, like six or 12-month assured shorthold tenancies, will be replaced by periodic tenancies. Tenants will have more freedom to move, and there will be lower administration costs for landlords, who will not have to renew a tenancy every year.

Which tenancy type is better and how to choose the right tenancy for landlords?

There is no type of tenancy that is better than another; some might have more favourable terms for tenants, such as assured tenancies, but this is usually a case of luck rather than judgement, and the result of past circumstances. In fact, few tenants actually get to choose what type of tenancy they are contracted to. It is up to the landlord, and even then it will usually be an assured shorthold tenancy (pending the introduction of the Renters Reform Bill) or a periodic/rolling tenancy. Only in special cases, as we have touched on in this article, will another type of tenancy be required.

haart can help you let your property

If you are looking to let your property, or have any questions about tenancies or letting, please pop into one of our branches. We can help with a range of property management services, advice and information about the lettings process.