Summer 2008 // contents | contact us | current issue | mortgage express

In agreement

Former FT journalist Clare Gascoigne says that a proper tenancy agreement is essential for landlords

Without a decent tenancy agreement, your precious buy-to-let investment could be seriously devalued. But just what should be included to protect both landlord and tenant?

“It’s often the obvious that people overlook — such as dating an agreement,” says Elizabeth Brogan, senior policy officer at the National Landlords Association. “But without that, you could have big problems getting possession at the end of the tenancy.”

The basis of most tenancy agreements is the Assured Shorthold Tenancy (AST), established in the 1988 and 1996 Housing Acts, but the devil is in the detail. Specifying the property exactly is important, particularly if it is in a block of flats or is a bedsit; make sure the agreement says Room 5, 39 Acacia Avenue.

Names and contact details of landlord and tenant should be included; if there is more than one tenant, all should be named. You can have up to six tenants on an AST. Beyond that, you need individual agreements with each person.

Many lenders refuse loans unless an AST is in place. “The reason is that if the landlord defaults on the loan and we have to repossess the property, we need to be able to sell — and that means gaining possession,” says Ryan Robinson of Mortgage Express.

An agreement should specify both landlord’s and tenant’s financial responsibility clearly: who pays the utility bills, who maintains the property and what counts as maintenance. Check that there is a clause that will allow the landlord access to carry out any repairs, commonly after 48 hours’ notice, but you should be able to get in without notice if there is an emergency.

Tenants’ constraints

Usually the tenant is constrained in his or her activities as well — such as not carrying on any trade or business from the property, or not creating a noise nuisance.

“Watch out for blanket prohibitions such as forbidding tenants from keeping a pet,” says Elizabeth. “You could fall foul of the Disability Discrimination Act, since that would prevent a blind person with a guide dog from renting the property. Instead, say that keeping pets is forbidden without written permission.”

The holding of a deposit needs to be clarified: the amount, the terms on which it is held and where it is held. But an AST can be used only where the rent is £25,000 or less a year; beyond that, you will need a contract between landlord and tenant.

An AST forms a good basis for any contractual agreement, but be careful not to provide any security of tenure greater than that provided by an AST.

Back to top | Back to contents