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Tenancy Agreements

3.2 Tenancy Agreements

3.2.1 Written Tenancy Agreements

Landlords should be aware of the benefits of written tenancy agreements
and the procedures necessary for obtaining such an agreement. Although
many short-term tenancies (three years or less) can be created without
a written agreement, it is generally not advisable for landlords to
allow occupation without first having secured a signed formal tenancy
agreement.

3.2.2 Benefits of Written Tenancy Agreements

A written agreement is required by law for fixed-term tenancies of
greater than three years, when the tenancy must be produced by deed,
with signatures being witnessed. Even in tenancies of three years or less, landlords are strongly advised to have a written tenancy agreement, which
the tenants should sign before occupation. The benefits of having a written
agreement are:

• it can prevent disputes later over what was agreed;

• if there is a dispute, it can help to resolve the dispute more
quickly;

• a well drafted tenancy agreement will help protect the
interests of all parties.

Landlords should note:

• after moving in, occupiers cannot be required to sign a tenancy
agreement;

• it will be difficult to evict a tenant without a valid tenancy
agreement;

• the accelerated procedure for recovery of possession [see
Chapter 5] will not be available unless the tenancy and
required notices can be evidenced from valid paperwork.

3.2.3 Tenant’s Right to a Written Statement

A Housing Act 1988 tenant who does not have a written agreement has a
right to ask for a written statement of any of the following main terms of
the tenancy:

• the date the tenancy began;

• the amount of rent payable and the dates on which it should
be paid;

• any rent review arrangements;

• the length of any fixed term which has been agreed.

The tenant must apply in writing to the landlord for this statement. The
landlord must provide it within 28 days of receiving the tenant’s written
request. A landlord who fails to provide a statement of tenancy particulars
without reasonable excuse, is committing a criminal offence and could be
prosecuted and fined.

3.2.4 Implications of Oral Agreements

In law, a tenancy can be created by oral agreement. If a person occupies a
property and pays rent, a tenancy will have been created even though there
has been no written agreement.

A landlord cannot allow a tenant to live in a property “on approval”, on
the basis that a tenancy will be granted later. The tenancy will have been
created by the initial acts of occupation and payment of rent.

A person exclusively occupying a property and paying rent will legally
be regarded as a tenant and be entitled to all the statutory protections
provided to tenants under the law.

3.2.5 Preparing a Written Agreement

Although landlords may draw up their own agreements, this is not
advisable. Drafting tenancy agreements is a highly skilled job and landlords
doing this without legal advice may find that they have actually made their position worse in the very areas where they were seeking to protect their
position.

It is far better to use one of the many excellent standard tenancy
agreements which are available from landlord associations, law stationers,
the larger general stationery stores, the many online services available
for landlords, and some local authority housing advice centres. Landlords
wishing to alter the terms of a standard agreement should seek specialist
advice.

The preparation of a written agreement is the key opportunity for both
landlord and tenant to agree the formal terms of their relationship. Both
parties should have every opportunity to read and understand the terms of
the tenancy which is being created before becoming bound by them.

Following changes to Stamp Duty in 2004, tenancy agreements no longer
have to be stamped in order to be valid. The new Stamp Duty Land Tax
may still be payable if they are of very high rent value. More details can be
found in the Inland Revenue leaflet Stamp Duty on Agreements Securing
Short Tenancies available from any Stamp Office. The Stamp Office Helpline
can provide more advice on stamp duty on 0845 603 0135 and there are
factsheets available on www.hmrc.gov.uk/so/index.htm.

It is best to have two copies of the tenancy agreement signed by both
parties with each keeping their own copy.

If the tenant occupies the property immediately, the agreement does
not need to be witnessed. If the tenant does not intend to occupy until a
later date (for example students signing a tenancy agreement in June and
taking occupation in September) it could be better to have the agreements
formally drawn-up and independently witnessed. Landlords should seek
advice on this (particularly if tenancy agreements are being created online)
as the legalities of the situation are complex.

Both parties should be careful when completing the agreements. Make sure
they are legible and that they can be read without difficulty in the event
of a dispute. Landlords should provide a full, valid and current address in
England or Wales. This could be the address of the landlord’s agent or his
registered business address. If a landlord does not give an address, this
might cause difficulties should any dispute arise.

If no address for the landlord is given at all, apart from being bad practice,
this will cause the landlord difficulties later if there is a need to evict a
tenant for arrears of rent.

If a landlord does not disclose their identity and their place of abode or
business address a tenant may make a written application to the person
who either collects, receives rent or the agent. Failure to disclose is a
criminal offence under the 1985 Landlord & Tenant Act.

3.2.6 Unfair Terms in Tenancy Agreements

There are now regulations to ensure that standard contracts between a
consumer and a business are ‘fair’.

These are the Unfair Terms in Consumer Contracts Regulations 1999. It has
been confirmed that they apply to tenancy agreements. The Regulations
are administered and enforced by the Office of Fair Trading who have
issued guidance (most recently in September 2005) on the effect of the
Regulations on tenancy agreements.

The Regulations do not cover the core terms of a contract (e.g. the rent and
property details) except in so far as they require that the contract must be
in plain English.

A standard term is unfair if it creates a significant imbalance between the
parties’ rights and obligations to the detriment of the consumer and it is
contrary to the requirement of good faith. If a term is found to be unfair it
will be void and not enforceable – but the rest of the contract will stand.

So far as tenancy agreements are concerned:

• any clauses which attempt to limit or exclude rights (e.g. legal
rights) which tenants would otherwise have had, are likely to
breach the regulations and be deemed unfair, unless there is a
very good reason for them (which should be apparent from the
agreement);

• clauses which impose any penalty or charge on a tenant must
provide for or state that the charge should be both reasonable
in amount and reasonably incurred;

• where a clause states that a tenant may only do something
with the landlord’s written consent, this should be followed
by the words “(consent not to be unreasonably withheld)” or
similar;

• any clauses which are difficult to understand, or which use
legal terminology, or words which have a specific legal
meaning which may not be understood by the ordinary person
(such as ‘indemnity’ or ‘jointly and severally liable’), will also
be vulnerable to being found invalid under the regulations.

Here is an example of how this can work.

Many landlords would prefer to prohibit pets from their properties and
would like a clause in the agreement saying this. However, if the clause
just says, “The tenant is prohibited from keeping any pets whatsoever”,
this clause is likely to be void (ultimately only a court can decide what is
or is not fair), and it will not stop the tenant from keeping pets if it is found
unfair.

To make the clause more acceptable, it should say something like “The
tenant is prohibited from keeping pets, save with the landlord’s written
permission which shall not be refused unreasonably”.

A clause in this format is not saying a landlord has to give permission.
There are many excellent reasons for refusing permission for pets - that
they damage the property, that some people are allergic to them, or that
the lease with the freeholder may also prohibit pets. If any of these reasons
were given it would be difficult for the tenant to argue that the landlord
was being unreasonable in reusing permission for a pet. The same words
may be a fair term or an unfair term, depending on the context in which
they are used.

It is easy to breach the regulations and render clauses invalid by inexpert
adaptations. Professionally drafted tenancy agreements sold by reputable
publishers and associations will normally have been drafted with these regulations in mind. Note also, that from time to time new cases may be
decided or new guidance issued by the OFT which will need to be reflected
in the form of tenancy agreements.

Make sure that the agreements in use are the most recent versions and do
not use old versions. See the Office of Fair Trading’s website for Guidance
on Unfair Terms in Tenancy Agreements : www.oft.gov.uk/shared_oft/
reports/unfair_contract_terms/oft356.pdf

3.2.7 Making an Inventory/ Schedule of Condition

Having an inventory (sometimes also called a statement of condition) is
essential if the property is let furnished, and a very good idea even if it
is unfurnished. An accurate and current inventory will help to protect the
position of both parties and can provide evidence to prove the condition of
the property at the time it was let.

Care should be taken when preparing an inventory. Make a detailed list
of all the belongings and furniture provided when a tenant first moves in.
It is also essential to record the condition of such things as walls, doors,
windows, and carpets etc. The inventory should be agreed with the tenant
before they move in and a separate copy of the list held by each party.
This should then be checked again at the time the tenant moves out, the
inventory will only provide protection if it is thorough, detailed and agreed
by both parties. If the inventory simply records “4 chairs”, that says nothing
about whether they match, or about their quality or condition. The condition
of the furniture, including existing damage to the furniture and fittings,
decorations and other contents should be noted on the inventory and
agreed with the tenant.

Photographs are often a good idea, particularly with high value furnishings.
The use of digital photographs is not always accepted by the courts as
evidence so it is advisable to print the photographs and for both the
landlord and tenant to sign and date the photographs as an accurate image.
With some properties, landlords and agents are now also taking videos but
this has more limited value in dispute resolution as they are much harder
to work with.

A thorough and detailed inventory will help avoid disputes, particularly
those involving the return of a deposit. It is advisable to keep all receipts
and to make a record of the meter readings in the inventory. Remember
that if there is a dispute over the condition of the property and this goes to
court or a deposit scheme adjudicator, it will generally be for the landlord
to prove the claim.

Taking an inventory is a long job and many landlords now use professional
inventory clerks to do this for them. The advantage of this, if a dispute over
the condition of the property ever happens, is that they will be able to give
independent evidence to the Judge.

Inventory clerks can be found via the website of the Association of
Independent Inventory Clerks at www.aiic.uk.com