Terms in Tenancy Agreements

Published on 2015-08-07

Details in Tenancy Agreements

A lease, a contractual agreement often called a tenancy in the lettings industry, grants a tenant exclusive possession, for a term, at a rent and should contain details relating to:

  • Parties: full names and addresses of all parties to the agreement i.e. all landlords and tenants
  • Property: the property being let. Any areas, outbuildings or rooms that are excluded must be noted
  • Length of tenancy: a statement of length of term
  • Price: the amount of rent, together with the frequency and date of payment, to whom it will be paid and method of payment.

The Forfeiture Clause

A forfeiture clause relates to how the landlord can regain possession if the tenant breaches the lease terms, also known as the right of re-entry clause. The clause itself does not allow a landlord or agent to repossess a property, but it must still be included in a tenancy agreement because it is necessary to formally warn the tenant what may happen if they breach the tenancy agreement. The landlord could then start proceedings to take the property back in the event of a breach.

The Deposit Clause

There must be full deposit details, including amount (usually equivalent to one month’s rent), how the deposit is held, by whom, what the deposit is held against, whether or not the tenant receives any interest, conditions for its return, and what the process is if there is a dispute.

The Housing Act 2004 made changes to the holding of deposits for AST Housing Act 1988 tenancies, which must be held in an insured scheme or a custodial scheme (see Tenancy Deposit Schemes). For tenancies that fall outside of this, deposits can be held by landlords or agents. An agent can hold a deposit as a stakeholder or an agent for the landlord.

Obligations of Landlords and Tenants

Tenancy agreements should contain details of obligations for both tenants and landlords e.g. tenants must pay their bills including council tax and utilities. Some obligations are implied and may not be stated in the tenancy agreement e.g. allowing the landlord to inspect the property. An implied obligation for a landlord would be to allow the tenant quiet enjoyment and insure the building and the landlord’s contents.

Additional or Non-Standard Clauses

Additional or non-standard clauses can be included in tenancy agreements, but any such clauses must refer to the standard clauses they relate to. Landlords cannot use additional or non-standard clauses to contract out of their statutory obligations.

Non-Standard Clauses

An agent can review and negotiate the terms of non-standard clauses but it is a very specialised area. It may be better to recommend the lease is reviewed by a solicitor. Non-standard clauses include break clauses; if either party wishes to be able to give notice before the end of the fixed term, both sides must be allowed to have a break clause, and options to renew. Care must be taken when dealing with option to renew clauses so that they do not become perpetual.

Potential corporate tenants may wish to use their own tenancy agreement. The landlord should be made aware that the agreement should be checked by an expert to protect their interests.

Categories: Residential Lettings Best Practice