Types of Tenancies
A tenancy 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. 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.
Tenancy agreements come in different forms. We have discussed short and long-term lets before, but here we are going to explain some further types you may come across.
What different tenancy periods are there?
The two primary types of tenancy periods are:
- Fixed-term, running for a set period of time; and
- Statutory Periodic, or more commonly known as periodic, running on a week-by-week or month-by-month basis.
A fixed-term tenancy agreement lasts for a set amount of time, typically six months to a year. 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.
There are a few important things to know about this type of tenancy, such as 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. If, however, you want to vacate the property, then notice should be given to your landlord or agent.
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.
An assured tenancy means a person can rightfully live in the property for the rest of their life, and they are not very common anymore. 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
As you might expect, assured tenancy holders have increased protection from eviction.
Assured Shorthold Tenancy (AST)
This term applies to a majority of tenancies and derives from 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
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.
By law, any deposit that has been paid has to be registered and protected. The landlord must use a government-approved deposit protection scheme to do this. The most recent changes in tenant fees and deposits came into force on the 1st June 2019.
Once the fixed term stated in an AST is due to expire, two things can happen: a new contract is signed between landlord and tenant or the tenancy automatically becomes a ‘statutory-periodic’, moving to a monthly rolling contract with the same rent.
Unsure of some of the wording you’ve found in a tenancy agreement? Try our handy haart jargon buster.
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
Unlike an AST, landlords are not obligated 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. However, a tenant has the right to stay in the property until the end of the fixed term, if they comply with the terms of the tenancy agreement.
This type of tenancy applies if you have a lodger living in your home and share rooms with them, like a kitchen or bathroom or if you are living rent-free with family or friends. An excluded tenancy usually provides less protection from eviction than other types of agreement. However, if you are living under an excluded tenancy, you still have rights outlined in this Shelter England article.
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).
A regulated tenancy only occurs in very limited circumstances now, but tenancies before 15 January 1989 were regulated under and 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. Learn more about regulated tenancies here.
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 shorthold 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. Tenancies automatically become periodic immediately after the fixed date in the contract has passed and when the tenancy is not renewed. Neither landlord nor tenant has to do anything, and a special kind of contract or clause is not required either.
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.
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)
Choosing the right tenancy agreement
Now you know what each type of tenancy means, you can choose the best one for you. As a tenant, it is important to know your rights and that your landlord is a responsible one. When you’re choosing a tenancy agreement, these are the big things you need to check:
- The start and end dates of the tenancy
- The landlord’s name – this may be the name of a company
- The property’s address
- The price of rent, when it’s due, and how it will be paid
- Whether this price can be reviewed and how
- The deposit amount and how it will be protected
- Who is responsible for paying bills? Think about things like internet and energy bills
- Circumstances which mean the deposit is partly or fully withheld (damage or breaking contract e.g pets or smoking)
Everything that should legally be in a tenancy agreement is listed at Gov.uk.
As a landlord, you also have responsibilities and obligations and should make sure you keep up to date with the latest legislation so you can support yourself and your tenants. If you’re just starting out as a landlord, haart can help you with everything from choosing a buy to let property to how to deal with damage to your rental property.
Creating a tenancy agreement
We also have a complete guide to what should go into a tenancy agreement, so if you need to put one together, or check over one you have received as a potential tenant, you’ll know if it’s correct.
Are you a landlord or tenant? Do you have questions or need more information? haart has a team of friendly professionals who can answer any questions you need to about tenancies and the legislation behind them.
Get in touch. You can use our contact us form or give us a call on 0345 899 9999.
You can find legal information on tenancies at Gov.uk.