Avoiding Problems when renting Property to Tenants Part 3

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Part 3 – Your Tenancy Agreement

Landlords, when looking for a tenancy agreement, often seem to want a tenancy agreement which is

  • Free and
  • Very cheap

However, this is NOT a good idea.  Your tenancy agreement is the document which sets out the rules under which your tenancy is going to operate.  So, it needs to be up to date and should include sufficient clauses to protect your position.  

Which rules out most free and probably all short tenancy agreements.

I also think that an agreement in plain English format is best.  Many tenancy agreements I have seen are almost impossible to read and understand – even for a property solicitor like myself!  

‘Gotcha’ clauses

Also, some people seem to think it is a good idea to make clauses as complex and pompous as possible with jargonistic ‘legal language’ to make it seem more impressive.  

Presumably this is so tenants will fail utterly to read their agreement (because it is basically unreadable) before signing it – allowing landlords to spring unfavourable clauses’ on them months later as justification for something-or-other, normally unfavourable to the tenant.  The word ‘gotcha’ comes to mind …

However, landlords who do this have clearly not read the Unfair Terms rules from the Consumer Rights Act 2015!  

Unfair terms rules and need for tenancy agreements to be transparent

The Consumer Rights Act now includes all the old ‘unfair terms’ rules which require contracts to be fair and not to give a business (normally the party who drafts the agreement) an unfair advantage.  

Also, section 68 of the Consumer Rights Act requires contracts with consumers (and all tenants are deemed to be consumers) to be ‘transparent’ – which means that it must be written in ‘plain and intelligible language’ and be legible. 

If the unfair terms rules are breached, the offending clause will be unfair and unenforceable.

When disputes come to court, Judges are required to consider whether clauses are unfair – whether the tenant asks them to do this or not.

So, you need to have a well drafted, fair and clearly understandable tenancy agreement.

What else should it contain?

Clauses to protect your position

There are three things in particular you need to watch out for:

  1. Rent must be expressed to be payable in advance – otherwise it is by default payable in arrears
  2. If you take a deposit there must be a special clause setting out your right to make deductions – otherwise you risk being unable to make any deductions (rendering the whole exercise of taking a deposit in the first place totally pointless), and
  3. You must have a clause (often called a ‘forfeiture clause) which allows you to use the grounds for possession in the Housing Act 1988 during the fixed term.  Otherwise you may not be able to evict your tenant for rent arrears!

Other clauses you may want to consider are:

  • A break clause if you have a long fixed term – in case you need to end the tenancy early.
  • Clauses limiting the number of guests 
  • Clauses prohibiting other occupiers without the landlords’ written permission (as otherwise you may find you have an HMO on your hands needing licensing)
  • Clauses dealing with the payment of bills
  • Clauses allowing you to charge the few fees which are left to you under the Tenant Fees legislation (in England).

Those are a few suggestions for you. 

Where can you find a good tenancy agreement?

Not (normally) for free on the internet! 

It is best going for a paid tenancy agreement from a reputable source making sure that it has been recently updated by specialist lawyers. 

The tenancy agreements provided by the landlord associations are generally pretty good, and we have a large selection of well-regarded tenancy agreements on Landlord Law.

But do read your tenancy agreement before you use it and make sure it is suitable.  We have a free guide you can use here.

Watch out for part 4 of this series, where I will be looking at the things you need to do during a tenancy.

Tessa Shepperson

17 March 2020. 
Tessa is a specialist landlord & tenant solicitor and runs the popular online
Landlord Law service.

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