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Article > Terms in a Residential Tenancy Agreement: Part 1

 

 

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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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