Different Types of Tenancy Agreements


March 5, 2020

Without a doubt, the best way to secure a tenancy between a landlord and tenant is with a contract. A written rental agreement lays the foundations for a successful tenancy and safeguards the rights of both the landlord and tenant.

A written tenancy agreement is a contract that makes everything clear, from the length of time in the property to the amount of rent due to particulars that surround living in the property. It’s a legally binding document that adds a layer of security to the entire rental process.

It is vital that landlords have a contract in place, but which type should you choose? In the world of letting, there is no one definitive way to do things. Some rentals are long term; others are short term. Some have multiple tenants; others have just one.

With so many particulars involved, it won’t surprise you to find that there are different types of contracts available in the UK. In this article, we will detail each type of agreement between a landlord and tenant and what it means for both parties.

 

Why have a tenancy?

Having a tenancy agreement isn’t a legal requirement, but entering into a written contract offers security — especially if the landlord plans to take a deposit from the tenant. Without a written agreement, landlords lose certain rights, such as being able to claim possession of their property. Even with Section 21 set to be abolished, it’s still vital that landlords have a legally binding contract in place. 

There are more practical reasons for a tenancy, too. A tenancy agreement also shows that landlords want to provide a good service to tenants and that they care about their rights. It also affords the opportunity to state particular aspects about the tenancy — eg, whether tenants can have pets or if they are allowed to sublet.

Essentially, a tenancy agreement removes any “ifs” or “buts” and sets everything in stone for the landlord and the tenant.

 

What should a tenancy agreement involve?

There are no set requirements for what a tenancy agreement should feature, though some things are common in all types of tenancies. A typical tenancy agreement often includes the following details:

  • The property address
  • Address of everyone involved
  • The amount of rent
  • How the rent will be paid
  • The deposit amount
  • The scheme the deposit will be registered to
  • Proposed terms of the tenancy
  • Notice periods for both landlord and tenant
  • Rights and obligations for both parties
  • A clause that allows possession of the property if the tenant breaks any rules
  • Special arrangements, eg pets and subletting

 

Different tenancy types

A tenancy will differ depending on the type of let between the landlord and the tenant, with  several options available in the UK:

Assured Shorthold Tenancy

In the UK, an Assured Shorthold Tenancy (AST) is the most popular type of agreement between landlords and tenants. If a rental contract is in the private rental sector (PRS), there’s every chance it will be an AST. An AST covers most long-term letting aspects, including details between landlord and tenant and between landlord and multiple tenants.

A row of bright and colorful houses in the Primose Hilll area of London, England. There is a clean and empty road in front and white clouds above.

The majority of ASTs stipulate an initial fixed-term contract of six to 12 months. During this period, landlords are unable to raise the rent unless there is a rent review written into the contract. Landlords are also required to protect the tenant’s deposit in a government-approved deposit protection scheme.

If the property is the tenant’s primary residence and the landlord doesn’t live in the property, it will most likely be rented on an assured shorthold tenancy. However, if the landlord charges high rent (over £100k), less than £250 a year, or it’s a holiday let, an AST can’t be used.

Statutory Periodic Tenancy

When the minimum term of an AST finishes, it automatically moves onto a Statutory Periodic Tenancy — also known as periodic. A periodic tenancy provides the same terms as an AST but without the fixed-term contract.

It comes into effect if the landlord or tenant doesn’t wish to recommit for another fixed term but are happy to continue on a monthly rolling basis. Tenants need to provide one month’s notice if they intend to leave the property under a statutory periodic tenancy.

Landlords, on the other hand, must provide the tenant with two month’s notice if they wish for them to vacate the property. A landlord can also raise the rent once in a 12-month period on a rolling contract but need to provide one month’s notice.

Tenancy at Will

A Tenancy-at-Will represents an agreement between the landlord and tenant that can be terminated at any time. There is no contract or lease involved, which means there is often no written agreement. Typically, Tenancy-at-Wills don’t specify the length of duration a tenant will stay at the property or how much they will pay in rent.

A Tenancy-at-Will is generally favoured by landlords and tenants who want more flexibility, as it doesn’t tie you down to a long-term contract (ASTs are usually 12 months). A tenancy-at-will is similar to Shorthold Assured Tenancy or Statutory Periodic Tenancy, which are the more common types of flexible contracts  in residential property.

However, in the UK, tenancy-at-will is used more for commercial letting than residential — eg, a pub or a shop lease. Therefore, it doesn’t crop up in residential letting as often, and landlords tend to operate on a  Statutory Periodic Tenancy for short-term rentals.

Excluded Tenancy

Some landlords let part of their home to a tenant while still living in the property. Such a scenario can fall under an Excluded Tenancy. This is when the tenant doesn’t have the same protections on offer in an AST and therefore loses some of their rights.

Landlords don’t need to protect the tenant’s deposit in a deposit protection scheme under an excluded tenancy. They can also evict their tenants without a court order and don’t need to provide four week’s notice, as long as they stick to the rules of the excluded tenancy agreement.

Regulated Tenancy

Regulated tenancies are uncommon in the modern-day world of letting, but they do still exist. They were mostly associated with renting in the UK before 1989 (before ASTs came into effect) and acted as a long-term tenancy where the tenants were entitled to a fair rent set by the Valuation Office Agency

Company Let

Many landlords decide to let their properties to a company rather than directly to the tenant. If this is the case, the tenancy is unlikely to be on an assured shorthold tenancy.  As a result, it doesn’t fall under the same rules for tenant deposit protection and eviction notices. The landlord is able to provide a “notice to quit” at the end of the tenancy, which replaces the typical eviction notice.

 

Choosing the best tenancy option

Landlords have plenty of options for choosing a tenancy agreement with their tenant, but sometimes the best method is the one with the least hassle and most security.

At Blueground, we offer the simplest tenancy agreement for landlords in London. Contracts last between 3-5 years and deal directly with Blueground as the tenant.

On top of that, properties are furnished by Blueground. We take care of all the paperwork and back and forth, and landlords are guaranteed rental income for the entirety of the contract. That means no void periods to worry about — and stress-free lettings for your London flat.


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