Different Types of Tenancy26-08-2020 | Other
Even though you may ever use one or two of them, as a landlord it’s good to swot up on the different types of tenancies and improve your knowledge of the rental market. You might be surprised at just how many there are...
Assured shorthold tenancy (AST)
By far the most common type of tenancy is an assured shorthold tenancy (AST). This is because most tenancies are automatically ASTs, so long as the property is private and not commercial. If the tenancy started after 1989, is the tenant’s main accommodation and you as the landlord do not live in the property, it’s most likely an AST. There are a few exclusions here, however. If you’re charging rent over £100k per year, or on the other end of the spectrum low to no rent, you can’t use an AST. This also applies if your property is a holiday rental. Most ASTs will run an initial fixed term of six or 12 months and you can’t raise the rent during this time unless the tenant agrees to it, or there’s a rent review clause in the contract. All the usual rules regarding protecting a tenants deposit in a government approved deposit protection scheme apply and once the fixed term is over, if you don’t sign a new contract with your tenant, the tenancy agreement automatically becomes periodic, moving to a monthly rolling contract with the same rent.
You may also come across an excluded tenancy. This is when you live in the property with your tenant and share facilities. It is essentially the tenancy for when you have a lodger. With this kind of tenancy, your tenant isn’t as protected, as with an AST. It’s slightly more informal. For instance, there’s no obligation to protect your tenant’s deposit in a government approved deposit scheme, and you’re usually able to evict your tenant without a court order and without giving four week’s notice. You do have to give them ‘reasonable notice’ to end the letting, which is usually the length of the rental payment period - for example, one month.
Assured tenancies were very common between 1989 and 1997 but nowadays, they are only really used by Housing Associations. An assured tenancy gives tenants long-term tenancy rights, and the tenancy only ends if they leave or are evicted for whatever reason. Housing associations aim to provide stable and long-term housing, so assured tenancies are ideal. However, your everyday landlord is more likely to opt for an AST.
Non-assured shorthold tenancy
Another uncommon option, non-assured shorthold tenancies can only be used in specific situations where we assured shorthold tenancy cannot be used. This could be because the rent is less than £250 per year, the tenant has their main home elsewhere, or you live in the same property as your tenant (but don’t share facilities). Similarly to excluded tenancies, your tenant has less protection with a non-assured shorthold tenancy. You don’t have to store their deposit in a government approved deposit protection scheme and you don’t have to serve a section 21 or section 8 notice to end the tenancy. That being said, the tenant does have the right to stay in the property until the end of the fixed term as long as they aren’t breaking the tenancy agreement in any way.
This is another one that’s unlikely to be used nowadays, but it’s good to be aware of. A regulated tenancy was commonly used before 1989 as a long-term tenancy. They are sometimes called protected tenancies or Rent Act tenancies. Tenants on this kind of tenancy have strong tenancy rights, with tenants entitled to a fair rent set by the Valuation Office Agency, and this rent is lower than a market rent. They also have rights to remain in the property as tenants even after their original agreement with their landlord has expired or has been terminated.
As the name suggests, this is when a property is being rented to a company rather than to an individual. The normal rules are quite a bit different when renting to a company. You aren’t governed by the same rules when it comes to things like deposit protection and eviction. As a private landlord, you’re likely to only use the most common form of tenancy - an assured shorthold tenancy. It’s good to be aware of them all though - especially if you’re looking to branch out in the future to more specialist tenancies.