Introduction
This is part one of a two part article that discusses
terms commonly found in residential tenancy agreements.
It does not seek to explain every clause or paragraph
that might appear, but give an easy to digest overview
of why a term may be included. We dive straight
in below.
The
property
The agreement should define clearly what is being
let. In a business property lease, this would usually
be done with reference to a map. However, unless
a house is large, it is unlikely that a tenancy
agreement would do so. Instead, the property should
be described as completely as possible, using house
numbers as well as names (and relative location
if a flat, e.g. ground floor flat number 4).
If
there are outbuildings, separate land or any part
of the property not being let (perhaps the landlord
wishes to let it separately or wishes to use it
himself), it should be made clear that these are
excluded. If the property has a designated parking
space in a communal parking area (particularly relevant
in large blocks of flats) then the space should
be clearly marked and referenced in the agreement.
Responsibility
for maintenance of the property
Landlords are responsible for structural repairs
and maintenance of the property by law, and cannot
contract out of this responsibility. However, the
tenancy agreement should state whether the landlord
or the tenant is responsible for non-structural
repairs (such as fixing a broken curtain rail) and
(re)decoration.
It
is worth noting that a landlord may have more incentive
to fix a problem correctly and for the long term
than a tenant may have, so even if it is the responsibility
of the tenant to carry out non-structural repairs,
it may be in the interest of the landlord to offer
to do so.
Tenancy
agreements usually contain a paragraph that obliges
the tenant to maintain any garden or external area
although it may be difficult to argue that the tenant
allowing "wild" flowers to grow devalued
or enhanced the value of a garden.
A
term allowing the tenant to redecorate should be
with the landlord's permission not unreasonably
refused, or in the current style and colours, so
that the tenant does not redecorate in a style that
would be unattractive for later habitants.
A
tenancy agreement usually states that tenants are
not allowed to damage the property. It is common
for the clause also to include furniture and contents
as well. Improvements without the landlord's consent
to prevent alteration, including the changing of
locks, are usually also forbidden.
Use
(including prohibited uses)
Unless specified in the tenancy agreement, a tenant
can enjoy quiet occupation and use the property
for any purpose. It is advisable to limit use to
occupation of a single, private, residential dwelling
and to include paragraphs that forbid antisocial
behaviour.
If
the property was bought subject to conditions of
use (many new build flats now have terms of purchase
that restrict actions such as drying washing on
balconies) then these should be included in the
tenancy agreement as well. Tenants should never
be allowed to run a business from the house either,
as the property may become bound by non-residential
property law instead.
Landlords
can restrict what the tenant does in the property
provided the restrictions are reasonable. "Reasonable"
is hard to qualify. As a very general rule of thumb,
if the use would result in likely damage or devaluation
of the property it is likely that a term restricting
that use would be reasonable.
Landlords
should make sure that terms intended to restrict
a use reasonably do not restrict other uses unreasonably.
For example, a term that restricts keeping pets
may be unreasonable if the tenant wishes to keep
a goldfish, but not if he wishes to keep a dog.
The
easiest way to control use is not to blanket ban
certain use, but qualify the restriction with "without
the landlord's permission, not to be unreasonably
withheld". That way the landlord can make judgment
on a case by case basis.
Note
as well that a landlord cannot prevent the tenant
from using the property in a way in which the landlord
disproves. For example, a tenant cannot be forced
to clean the property to a set timetable, or not
to have guests to stay overnight or not to cook
certain types of food. As long as the tenant does
not harm the property, all that the landlord can
ask is that the property is left in the same condition
at the end of the tenancy as at the beginning.
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The
deposit
If a deposit is taken then the amount and who will
hold it should be recorded in the tenancy agreement.
All deposits for assured shorthold tenancies are
required by law to be held by a government authorised
tenancy deposit schemes.
Payments
included in the rent or other than rent
Sometimes a landlord will prefer to keep utilities
and other bills in his own name, perhaps because
of the administrative burden of transferring them
to the tenant. This isn't advised. Some bills may
be based on consumption when the tenant has no incentive
not to consume (such as in the case of electricity,
gas and water) and the landlord may face much greater
bills than he expected. The tenant may also need
some utility bills in his own name to be able to
prove that he lives at the address.
If
the landlord does wish to pay the bills himself,
the cost can either be included in the rent (as
part of the fixed amount) or specified as an additional
payment that covers the bills (but not more). Which
bills are paid by whom should be recorded in the
tenancy agreement.
Our
advice is to let the tenant pay for all associated
service costs including council tax. Collecting
additional payments creates another administrative
burden, disrupts the landlord's cash flow and can
be problematic to enforce.
Penalty
clauses
Many penalty clauses are liable to be found void
under the Unfair Terms Regulations (see our article
on unfair terms in residential tenancy agreements).
Penalty clauses need to be used very carefully.
Penalties
cannot be excessive in size, nor unjustly charged.
A penalty clause should recompense a landlord for
costs incurred, not punish the tenant. It would
be wise to draw the tenant's attention to any penalty
clause before the tenancy agreement is signed. Commonly
this would be done in a covering letter.
Examples
of penalty clauses are:
Interest
on late payment of rent - A clause allowing interest
on late payment of rent is recommended, although
it should not be excessive. The rate paid should
be about what the landlord would receive on a high
interest bearing bank account. If
the clause is not included, a landlord can only
claim interest if he starts court proceedings. The
agreement must state on what amount interest is
payable, i.e. rent lawfully due.
Fixed
penalties instead of interest payment - Fixed penalties
are easier to calculate than interest. If the fixed
amount is for a low amount, it will probably be
seen as fair, but the landlord may be better off
charging interest than a fixed amount. Not only
may he recover more of his costs from non-payment,
but he is also less likely to be challenged on whether
the term is fair.
Expenses
Expenses are fair (such as administration charges
to send a letter to the tenant notifying him of
unpaid rent) provided the charge reflects the true
cost and provided the expense is necessarily incurred.
Charges cannot penalise the tenant. Excessive charges
would be deemed unfair.
Most
landlords would expect some cost to letting their
property and would absorb such costs themselves.
Rent
review clauses
Rent review clauses are becoming less common in
tenancy agreements, particularly ASTs, because it
is usually simpler for the landlord to serve notice
and end the current tenancy then agree a new tenancy
on new terms. The effect of the tenant not signing
the new agreement is the same as the tenant not
agreeing to a higher rent - that the original tenancy
ends and the tenant moves out.
A
rent review clause provides for a review by an independent
party as to what is a fair rent. A true rent review
(and not just a pre-agreed rent increase) may decrease
the rent or increase it. Rent reviews should only
take place after the fixed term has ended.
Rent
can also be increased periodically by a pre-agreed
amount or reference to an index such as inflation
after a certain amount of time. Period reviews are
less "reviews" and more just increases
since they aren't related to "market"
conditions. Pre-agreed increases could take place
at any (pre-agreed) time, including during the fixed
term.
Further
information and useful documents
If
you require a tenancy agreement template,
you may be interested in looking at our collection
of assured shorthold tenancy agreements, or
our residential tenancy agreement drafting
service .
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