Tenancy agreements – Why you need one

Did you know its not actually necessary, legally, to have a tenancy agreement? 

You can create a perfectly valid tenancy on a handshake, handing over the keys and collecting the rent from your tenant (s54(2) Law of Property Act 1925).

The tenant goes in and, bingo – assured shorthold tenancy created. No problem.

Or is there?

Here are three possible problem scenarios

1. Your tenant hands you a cheque for £500 for the first months rent. You say ‘hang on a minute, the rents £600’. He says “Oh yeah? Who says? We agreed £500 mate” How are you going to prove any different? Without a tenancy agreement with the rent clearly stated?

2. You take a deposit for £600 and duly protect it. At the end of the tenancy, you make a claim for the totally ruined carpet in the front room. Your tenant disputes it. It goes to arbitration. You lose. Why? There is no tenancy agreement clause setting out the circumstances under which you can make deductions from the deposit. Oh dear.

3. You decide you want your tenant to go. However, because she wants to be re-housed by the local authority you are told you have to evict her through the courts. You say ‘no problem’ and serve a section 21 notice. Your lawyer points out that you can’t use the accelerated procedure as you do not have a tenancy agreement and so you have to use the other procedure where there is a court hearing. The lawyers bill goes up. Ooops!

It will never happen to me

Now you may be saying “I ALWAYS give my tenants tenancy agreements“.

Good. I’m glad to hear it.

However, it’s something you need to be really careful about because if you let the tenants into occupation before they have signed the tenancy agreement, they can turn around and refuse. You can’t make them sign and as they are already in the property, there is not a lot you can do about it other than evict them, which will take a long time.

So to prevent problems occurring, make it a rule that you will never allow tenants to have the keys and move in until AFTER the tenancy agreement has been signed, by ALL the tenants.

The “letting tenants in on approval” myth

Sometimes people think, mistakenly, that it is possible to allow tenants to move in ‘on approval’ on the basis that if they behave themselves they can be given a ‘proper’ tenancy agreement later. However, this is a myth. As soon as the tenant moves into the property and pays his first rent he is a proper assured shorthold tenant. The only difference is that he is a proper assured shorthold tenant without a tenancy agreement. See the disadvantages listed above.

The situation if there is no signed agreement

So what is the legal situation if, by accident, a tenant does end up in your property without a signed tenancy agreement – and he then refuses to regularise the situation by signing one after he has moved in?

Here are some of the main points:

• In most cases he will have an assured shorthold tenancy.
• If rent is payable monthly, he will in most cases have a monthly periodic tenancy
• You will be bound by the repairing covenants in s11 of the Landlord & Tenant Act 1985
• You will not be able to evict him from the property other than via a court bailiff after obtaining an order for possession (Protection from Eviction Act 1977)
• You will be bound by the various regulations such as the gas regulations, as well as the powers exercised by Local Authorities, for example under the Housing Act 2004 relating to the condition of the property

However the tenant will also be subject to various rules and regulations:

• He will not be able to assign or sublet the property without the landlord’s consent (s15 Housing Act 1988)
• He will not be entitled to carry out any improvements or alterations to the property without the landlord’s written consent (s81 Housing Act 1980), and
• He will be under a duty to act in a ‘tenant like manner’ further to the Lord Denning decision in the 1954 case of Warren v. Keen.

None of this can really compensate for the lack of a properly drafted tenancy agreement.

So make sure you have one signed before the tenant goes in!

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