If you’ve found the right tenant and references have been checked The next step is to make them sign a tenancy contract. Do I have to bother with a formal contract? In the end, the answer is no. It might surprise you to find out that you are able to offer a tenancy on a verbal basis in the event that these conditions are met
it will take effect from the moment it is granted
it’s for a time not exceeding 3 consecutive years and
it is the most affordable rent that can be obtained without the need for a premium being paid (one off capital payment to cover the beneficial interest in the lease)
But I would not suggest this even to a relative or friend. This is due to the fact that the process of enforcing possession or modification of conditions is more costly without the evidence of a tenancy agreement since accelerated proceedings aren’t readily available. Note that accelerated possession procedures does not necessarily mean speedy!
The advantages of a tenancy agreement
Having a tenancy agreement form can be beneficial to both parties, and hence they are utilized in the majority of instances. As a landlord, you are aware that you are renting to a tenant for an agreed-upon period usually 6 months in the ASSURED Shorthold Tenancy (AST). The tenant is granted an essential security of tenure for the time they will not be removed from the property in the event that they do not pay the rent. It is important to note before proceeding that under law, two or more people are referred to as tenants. Thus, even if there are many different tenants living in the same property in a single contract legally, they are known as tenants (singular).
The current law is derived in the Housing Act of 1988. The act ushered in the deregulation of residential tenancy law , by the introduction of two types of tenancy, The Tenancy with Assured Tenancy (AT) as well as the Assured Shorthold Tenancy (AST). Prior to this residential lettings, they were controlled by the rules in the legislation of 1977, known as the Rent Act. This outdated piece of legislation was another piece of the puzzle for the private rental industry. It ensnared landlords with tenants who had the security of tenure (i.e. it was virtually impossible to force these tenants back).
The overhaul of the tenancy law as part of 1988’s Housing Act of 1988 was in many ways the start of the “buy-to-let” revolution. It ended hopelessly the fear of rent restrictions and unjustified levels of tenure security. These two elements were the main responsible for the continual decline in the private letting market. In 1988, the Act was later amended with the help of the 1996 Housing Act. This revised the procedures and made it simpler for landlords to rent properties without worrying of being unable to return their property after the expiration of the lease.
The assured Tenancy
As I’ve said before, you can set up an tenancy without having a formal agreement. A tenancy contract is a good idea. It clarifies in clear language the rights and responsibilities of the tenant and landlord. If there are disagreements, this agreement can be helpful in settling disputes that could end up in the Courts. What kinds of tenancies exist and what do I have rights and responsibilities as landlord?
There are two major kinds of tenancy that pertain to the rental of residential property:
It is comprised of the assured tenancy (AT) as well as the Assured Shorthold Tenancy (AST).
Beware of the resemblance between their respective names. The two kinds of assured leases are distinct.
The AT offers tenants a lot of protection from tenure. That means, at conclusion of the agreed-upon term the tenant does not need to move out, and has legally the right remain unless the landlord is able to establish grounds to take possession. ATs give tenants the option of having their rent reviewed by the Rent Assessment Committee if they find it excessive. This type of tenancy created primarily to provide tenants with greater assurance of tenure. For the majority of landlords and tenants, this isn’t a good option. The reason is that for tenants, one advantage of renting is that it provides temporary, flexible housing. What a landlord would like is to be able to charge a market rate and get vacant property quickly and effortlessly.
Because of this, the majority of tenants are assured Shortholds. Before the 28th of February 1997, all tenancies were assured tenancies (AT) without notice was signed in order to signify the existence of an AST. The unquestionable popularity of the AST over its more restrictive ‘cousin’ that on the 28th of February 1997, this changed with all assured tenancies were automatically are now shortholds unless specifically stated.