L&T Glossary

The following is a brief explanation of some of the terms commonly found in residential lettings.

ASSURED SHORTHOLD TENANCY

Assured Shorthold Tenancies (ASTs) became very popular after their introduction by the Housing Act 1988, because for the first time for many years they provided a way of letting residential property under which the landlord could be certain of regaining possession from the tenant at the end of the tenancy. This development was recognised by the Housing Act 1996 which simplified their creation and means that nearly all new private sector tenancies are ASTs. The principal features of an AST are:

• The tenant is one or more individuals.
• The tenant rents the property to use as his main home. Minor business use (such as a self-employed researcher working from home) does not prevent the tenancy being an AST, provided the tenant also lives in the property.
• The tenant rents the property to use as his main home. Minor business use (such as a self-employed researcher working from home) does not prevent the tenancy being an AST, provided the tenant also lives in the property.
• The minimum initial term of an AST is, in effect, six months, as except in case of a serious breach of the tenancy the Court will not grant a possession order any earlier than six months from the start of the tenancy.
• After the expiry of the initial term, if the tenant remains in the property and continues to pay rent, the tenancy automatically continues as a statutory periodic AST, on the same terms and conditions as contained in the tenancy agreement.
• The landlord can obtain possession at the end of the tenancy, or at a later date, provided he has served a Section 21 Notice of Seeking Possession on the tenant at least two months in advance.

The rent cannot exceed £25,000 per annum, nor be less than £250 (£1,000 in Greater London) per annum. Both these limits apply pro-rata to shorter tenancies. There are certain exclusions from the AST regime including holiday lets, company tenancies and resident landlord tenancies. Note that it is not possible to convert a tenancy that is protected under the Rent Act 1977 into an AST; and it is only possible to convert an Assured Tenancy into an AST with the express consent of the tenant (form HA37). Most of our tenancy forms will create ASTs by default; AGREE19 and AGREE20 are specifically intended for ASTs.

COMPANY TENANCY

If the tenant is to be a limited company rather than one or more individuals, the tenancy cannot be an AST. The reason is that while a limited company is a separate legal entity from the individuals who own or run it, as it has no physical existence; it can’t actually live in the property itself. Company tenancies arose originally as a means of letting residential property without creating a secure tenancy, before ASTs were introduced. Although this is no longer an issue, some companies wish to rent property on this basis as part of the package of benefits that they provide for the employee who occupies the property. There is no minimum term for a company let, nor any formal notice required before possession can be sought at the end of the tenancy. The company, not the individual employee in occupation, is responsible for paying the rent and all other obligations of the tenant. Note that to ensure that it is a genuine company tenancy, the company usually retains the right to substitute one employee for another during the tenancy. The landlord cannot forbid this without good reason – for example, overcrowding the property. Use form

DEPOSIT

It is common for the tenant to pay a deposit, as well as the first instalment of rent, at the start of the tenancy. The deposit is normally held by the landlord or letting agent and provides some security against damage to the property caused by the tenant - dilapidations. It is usually equivalent to one month or six weeks’ rent. Use form LDA – note that interest on the deposit is due to the tenant, as until and unless he breaches the agreement, it is his money.

DILAPIDATIONS

Dilapidations are the damage to the property and contents noted at the end of the tenancy, in excess of what can be reasonably described as fair wear and tear. It is very important that you prepare a detailed inventory and check it with the tenant at the start of the tenancy, and again at the end, to provide if possible an agreed list of what damage amounts to dilapidations (for which the tenant is liable) and what is fair wear and tear (for which he isn’t). In assessing the costs for which the tenant is liable, you must allow for depreciation (reasonable wear and tear) even if the tenant agrees that he has damaged an item. For example, if the tenant has ruined a five year old living room carpet by spilling red wine over it, you probably cannot make more than a small charge, because at five years it is likely to be nearing the end of its expected life anyway. To charge him the full replacement cost would result in “betterment” – i.e. you benefitting financially – and if a dispute goes as far as the Court, the judge will probably object to this.

FAIR WEAR AND TEAR

Any property and particularly its contents and furnishings will show minor damage and other signs of wear over time, even with the most careful occupant, whether tenant or owner-occupier. Because this is inevitable with normal use of the property, you cannot require the tenant to make good or pay for it; normal use of the property is what he has been paying rent for. Assessing what is and is not reasonable wear tear is very far from being an exact science; it is the minor damage to a property that could be expected over the duration of the tenancy, with a reasonably conscientious occupant.

FIXED TERM TENANCY

This is a tenancy which as well as a starting date has a defined end date, typically after six months or one year. For tenancies of one year or longer, it is quite common for the tenancy agreement to contain provisions allowing the tenant or both parties to terminate the tenancy earlier (often called a break clause); this does not prevent the tenancy being called a fixed term tenancy, because there is still a defined date beyond which it will not continue.

GUARANTOR

A guarantor is any third party who agrees to meet the obligations of one party to an agreement, if that party fails to do so. In residential lettings, it is quite common to seek a guarantor who agrees to meet the obligations of the tenant if the latter fails to do so; particularly if the tenant is young and/or a student, or has a low income, or a poor credit history, or no credit history at all (for example, through having only recently arrived in the UK). For a rental guarantee, use form RG.

INVENTORY

It is important, and for a furnished letting vital, to prepare a comprehensive inventory in advance of the start of the tenancy. This is a list of all the items in the property, with notes on their condition; and should also include notes on the appearance and condition of the internal decorations of the property. Use form INVEN. A copy of this document should be given to the tenant at the start of the tenancy. It is best to walk around the property with the tenant, before he has moved his possessions in, checking each item on the inventory and agreeing any further comments at the time. Alternatively, provide the tenant with a copy of the inventory and require him to make any comments on it, in writing, as soon as possible – typically within five days of the start of the tenancy. At the end of the tenancy, when the tenant has removed his possessions and is ready to hand back the keys, you should check the inventory in detail with him again, to agree if possible on the differences; and which of those are fair wear and tear and which are dilapidations. Without a detailed inventory check and the start and end of a tenancy, you will find it difficult to justify any deductions from the tenant’s deposit.

JOINT AND SEVERAL LIABILITY

If you are letting the property to two or more tenants, their liability will normally be “joint and several”. This means that each of them is individually responsible for payment of the whole rent, and for any damage to the property or other breach of the agreement, whoever caused it. For example, if there are three tenants, and two pay what they regard as their share of the rent (one third each), if the third does not pay, all three are equally liable for the arrears. (Technically, in signing the tenancy agreement, they agree amongst themselves to act as a single unit.) To avoid compromising their joint and several liability, you should not treat them as individuals who are separately liable for part of the rent, but always as a group who are individually and collectively responsible for the whole.

LANDLORD’S DETAILS AND ADDRESS FOR SERVICE

If there is more than one landlord, the full names of all joint landlords must be shown on the tenancy agreement. By law you must also provide the tenant with an ‘address for service’. This is an address at which you can be sued, should the need arise. That is, if the tenant brings legal proceedings against you, the Court will send the papers to the address you have given as your address for service, and it will be assumed that you have received them, whether or not you actually have. The address for service must be in England or Wales (not Scotland as it has a separate legal system). It can be your own address, or that of your solicitor or managing agent for example, or even a friend or relative. Our tenancy forms provide a space for this address. But if you need to notify the tenant of it separately, use form L&T70. This might arise, for example, if you purchase a property which is subject to an existing tenancy. The tenant does not have to sign a new tenancy agreement, and you will take over the rights and responsibilities of the previous landlord, but you must notify the tenant of the change of landlord and the new address for service. 5

LODGER

If you are letting a room or rooms within your own home, the difference between a lodger and a tenant is not always clear-cut. The main difference is that a lodger, as well as sharing part of the property (typically the kitchen and bathroom) with you, is also provided with services by you: periodic cleaning, or provision of regular meals for example. A lodger has no protection against eviction (but physical force or the threat of it must not be used), although he should be given reasonable notice when you want him to leave. Lodging agreements are usually informal and often verbal, but a short written statement of the services that you will provide, the rent and how often it must be paid, and what it does or does not include (use of the telephone for example) is recommended.

PERIOD

The period of the tenancy is the length of time for which each instalment of rent is paid. If the rent is payable monthly, then the period of the tenancy is one month; if it is payable weekly, the period is one week. Rent is normally payable in advance for each rental period. See periodic tenancy.

PERIODIC TENANCY

This is a tenancy that will continue indefinitely, from month to month or week to week for example, according to the period of the tenancy, until it is brought to an end by either landlord or tenant. Rules govern the length and timing of notice that one party must give to the other to terminate a periodic tenancy. If the rent period is one month or longer, notice must normally be equal to or longer than one rent period; if the rent period is weekly, the landlord must give not less than four weeks’ notice. In all cases notice from either party must expire on the last day of a rent period. For non-AST periodic tenancies, you can use a notice to quit (form L&T61). But see Section 21 notice for the special rules governing ASTs.

QUIET ENJOYMENT

This has nothing to do with decibels but refers to the right of the tenant to live in the property peacefully, without undue disturbance from the landlord or the landlord’s agents. It is his home during the tenancy and he is entitled to the same privacy as an owner-occupier. Occasional inspections of the property are acceptable, provided reasonable (at least 24 hours’) written notice is given; professional managing agents generally carry out between two and four such inspections per year.

REPAIRS

The landlord has a statutory obligation to maintain the structure of the building and the means of supply of heating and hot water. In addition, if there is a gas supply to the property, he must also have the installation and any appliances using gas properly checked by a CORGI-registered contractor before the tenancy begins, and annually thereafter. If the property is let furnished, then any soft furnishings provided by the landlord must comply with the The Fire and Furnishings (Fire)(Safety)(Amendment) Regulations 1993 and carry labels to that effect – all new furniture sold in the UK will almost certainly comply. There is no statutory requirement on the landlord to repair the contents and fixtures of the property, such as the washing machine; but a prospective tenant who is offered a property that contains domestic appliances and other items of furniture will reasonably assume that the landlord will repair or replace them if they break down. If the landlord does not intend to do so, this should be clarified in advance, before terms are agreed and the tenant signs a tenancy agreement. The landlord is not obliged to pay for any repairs caused by neglect or misuse of the property or contents by the tenant; nor to put the property or contents into a better condition than they were in at the commencement of the tenancy, provided they perform their function adequately.

RESIDENT LANDLORD TENANCY

If you live in a flat within a building and own one or more other flats within it that you wish to let; and if the building has at some time been converted into self-contained flats from a single house; then you cannot create an AST. Instead, this will be a “resident landlord” tenancy. Although such tenancies are still governed by the Rent Act 1977 rather than the Housing Acts 1988 and 1996 which set up ASTs, there is no question of creating a secure tenancy. There is no minimum term for the tenancy, nor any need to serve a formal notice on the tenant before you can seek a possession order at the end of the tenancy if it is a fixed term. If the tenant does not vacate voluntarily, the Court has only a limited power to delay possession. AGREE3 is suitable for a resident landlord tenancy (but see also Frequently Asked Questions). If the building is a purpose-built block of flats, then subject to the usual restrictions you can create an AST, using forms AGREE19 or 20 for example.

SECTION 21 NOTICE

If you want possession of the property at the end of a fixed term AST tenancy; or if the AST is continuing as a periodic tenancy which you now want to end; you must give the tenant at least two calendar months’ notice, by serving a Section 21 Notice on him. Use form HA21 or HA21A respectively; do not use L&T61. Note that if the tenancy is periodic, and the rent period is longer than two months, then the Section 21 Notice must be served before the start of the rent period at the end of which you require possession. In neither case do you have to give any additional reason why you want possession. If the tenant does not vacate voluntarily on or before the expiry of the Section 21 Notice, you must apply to the Court for a possession order. Provided the paperwork is correct, the Court will grant you an order.

SURRENDER

A surrender of a tenancy takes place when you and the tenant voluntarily agree that the tenant can give up his tenancy, in a way that is not provided for in the tenancy agreement. For example, you agree to allow the tenant to leave earlier than the expiry of the fixed term (where there is no break clause in the agreement); or, if the tenancy is periodic, by giving less notice than is necessary. You can place reasonable conditions on a surrender, to ensure that you are not out of pocket, but you should not seek to penalise the tenant in addition; this is regarded as unfair by the Office of Fair Trading, as is a blanket refusal to consider a surrender. It is very important that the terms of a surrender are agreed with the tenant in writing – see standard letter section.

TENANCY

A contractual relationship between a landlord (owner of a property) and a person who pays rent in return for exclusive use of the property. Since the Housing Act 1996, nearly all new tenancies in the private sector fall into one of the following categories: Assured Shorthold; company tenancy; resident landlord.

TERM

The term of the tenancy is the length of time for which it will continue until the expiry date specified in the tenancy agreement is reached. In principle the landlord and tenant can agree at the outset on any term they choose, but there are some restrictions, the most important affecting Assured Shorthold tenancies. See Assured Shorthold, fixed term tenancy.