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Types of tenancy

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The landscape of the business of being a landlord was dramatically affected by the 1988 Housing Act and its 1996 revision. The Act made it very much easier to set up a tenancy and for landlords to charge a full market rate for rental of their property. It also made it much easier for landlords to evict tenants who fail to pay their rent or cause aggravation to neighbouring residents.

There are two common types of tenancy as defined by the Act, these are known as assured tenancies and assured shorthold tenancies. Assured tenancies are sometimes known as full or ordinary assured tenancies, whilst assured shorthold tenancies are often just known as shorthold tenancies.

The normal circumstances where one of these types of tenancy apply are where:

  • The tenancy began after 15 January 1989.
  • You are a private landlord and occupant is a private tenant.
  • The house or flat is self-contained separate accommodation and is the tenant's main home.

A different type of tenancy will be in place if:

  • The tenancy began before 15 January 1989.
  • It is a business, agricultural or licensed premises.
  • The property is being let as a holiday accommodation.
  • It involves a tenancy granted to an educational establishment.
  • The rent is above £25,000 or below £250 per year.
  • You are a resident landlord.
  • The property is owned by the Crown or a Government Department.
  • The landlord is a local authority, a new town, a development corporation, a housing action trust, or a fully mutual housing association.

Joint tenancy
A tenancy can be agreed with two or more people, in which case each person is jointly and individually responsible for meeting the terms of the agreement. This means that if one of the tenants does a runner owing you rent, you are legally entitled to attempt to recover the money from any remaining tenants.

Assured shorthold tenancy
You should almost always let your home on an assured shorthold tenancy and most lenders will require that you only let the property out under this type of tenancy. The main reason for this is that it gives you a guaranteed right to get your home back after 6 months if you need to.

There is no special procedure for setting up an assured shorthold tenancy, other than agreeing the duration of the minimum term and the level at which rent will be paid. Unless there is a break clause, neither party can terminate a fixed term tenancy before the end of the term without the agreement of the other party.

Full assured tenancy

This form of tenancy provides the tenant with even more security. When the tenancy comes to an end, the tenant still has the right to remain in the property until the court grants the landlord possession. The court merely needs one of seventeen discretionary and mandatory grounds to find in favour of the landlord. They must, however, give the tenant written warning of their intentions to seek a possession order in the court. There are very few circumstances as a private landlord, where it would be in your best interests to bestow such rights on a tenant.

With this type of tenancy, both the landlord and the tenant agree on the rent, which remains the same unless they both agree to change it. The landlord cannot normally seek to increase a rent for which there is no rent review mechanism for a fixed term tenancy, but there can be a provision in the agreement for a rent review after a set amount of time.

If for some reason you do decide to set up an assured tenancy, you must either:

  • Give the tenant notice that the tenancy is not an assured shorthold tenancy before the tenancy begins or,
  • Include a simple declaration in the tenancy agreement.
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