Investing in property to rent out is often seen as a passive way to make money, but the truth is there are a lot of complex issues you need to deal with before you earn any rental income. After the legal complexities of buying a property you then need to ensure you’ve a legal contract ready for tenants to sign, and that’s where assured shorthold tenancy agreements come in, but what are they?
An assured shorthold tenancy agreement (AST) is a legally binding contract between a landlord and a tenant that outlines the rights and responsibilities of both parties and giving the tenant the right to live in the property for a set period of time, usually 6 or 12 months.
ASTs are the most common type of rental agreement in the UK, and are typically used for residential properties. The main benefits of using an AST are that it is quick and easy to set up, and they provide certainty for both parties. Private landlords should always use an AST when renting out property.
The tenant is guaranteed a certain amount of time to live in the property, and they cannot be removed without proper cause. At the end of the agreed period, the landlord can choose to renew the agreement or evict the tenant.
As the agreement sets out the rent payable, notice period and other terms, it sets out a clear expectation for both parties. Typically, they are drafted by a solicitor, but you can also purchase a assured shorthold tenancy agreement template from Letting A Property.com.
Once agreed, you should retain a copy of the agreement and should also provide your tenant with a copy, so it can be easily referred to (e.g. if they want to check the minimum period or correct procedure for handing in their notice).
Why do I need an assured shorthold tenancy agreement?
Typically, ASTs are drafted by an experienced solicitor to confirm the terms of the tenancy.
The assured shorthold tenancy agreement is created to protect both parties involved in the rental process. The landlord gets protection from the tenant not paying rent, and the tenant gets protection from eviction for breaking any of their obligations under the agreement.
As a landlord it’s vital you have this protection in place, how else would you prove the amount of rent a tenant owes or the circumstances under which a tenant’s deposit may be withheld?
Without an agreed-upon document, it becomes very difficult to enforce your rights, and it’s just as important for tenants to give them comfort that you are a trustworthy landlord.
If there are any problems between you and the landlord, an AST will help to resolve them quickly and easily.
How long is an assured shorthold tenancy agreement?
A significant element of an AST is how long it lasts. How long are you happy for the tenant to stay in your property?
An assured shorthold tenancy is usually in place for a fixed period of time, typically 6, 12, or 18 months, and it can be renewed at the end of the term.
Typically, you would have a 6-month period in place with new tenants. As a landlord this is a good length of time, it gives me the opportunity to make sure they’re a good tenant, and if they’re not, I can quickly give notice in writing and evict those tenants who are not performing up to expectations or who have violated the terms.
At the end of the agreed period, the rental can continue as a weekly/monthly tenancy with the same rules as the expired fixed-term agreement, or a new contract can be put in place, or the tenant may move out.
Once you get to know and trust the tenants, you might consider offering a longer term, such as 12 or 18 months. Be careful of any longer as you are unlikely to be able to adjust the rent during the agreed period, if your underlying costs increase you don’t want to have to wait 3 years before you can pass an increase on to tenants.
Tenants may also be wary of signing for a longer period without some sort of break clause, which is a clause in a contract that allows one party to terminate at agreed points during its term without penalty.
For example, you might have a 5-year term with a break clause at the start of year 3. These are typically found in commercial rental agreements, where longer rental periods are more common.
An AST can be created in two ways: by using a legally binding document or by agreeing verbally between both parties. A verbal agreement is more risky for both parties as they have less legal protection if something goes wrong. It’s always best to get everything in writing to avoid any confusion.
What is included in an assured shorthold tenancy agreement?
In general the following statement of terms should be covered:
- The name and address of the tenant and landlord;
- The date the tenancy begins;
- How much rent is to be paid and when it is due;
- What services are included in the rent;
- What furniture is included in the rent;
- If pets are allowed;
- Who is responsible for repairs;
- If smoking is allowed;
- When the property may be occupied;
- If subletting is allowed;
- What notice must be given before either party can end the agreement;
- Any other special terms agreed upon by both parties.
Keep in mind that being a landlord doesn’t give you the right to enter the property without permission from the tenant, unless it’s an emergency or there is a clause in the contract that allows them to do so.
How do I get an assured shorthold tenancy agreement?
If the thought of self drafting a legally binding agreement sounds scary…it should! Legal agreements are complicated and must take into account the needs of both parties.
You can appoint a solicitor to create an assured shorthold tenancy agreement on your behalf, or you can purchase a pre-drafted assured shorthold tenancy agreement template and modify it yourself.
Using a solicitor will likely cost you a lot more than using a template, but it should also require less work from your side of things. They’ll create the agreement based on your input, you shouldn’t need to modify it other than to add the tenants name.
However, you can save a lot of money by doing a little work yourself. After purchasing the assured shorthold tenancy agreement template, you should read through it and make sure you are comfortable with the terms. Check it includes previsions for the items mentioned above and adjust as needed (for example the template may say ‘no pets’ whereas you might be happy to allow pets).
Rental agreement templates are still legally binding and by purchasing one from a reputable website you can be confident they’re regularly checked and updated in line with any legislation changes.
If you’re unsure where to purchase an assured shorthold tenancy agreement template from I recommend an agreement from Letting A Property.com which provides a comprehensive rental agreement template written in plain English.
That website has a range of useful resources for landlords, removing the headache of having to pay for legal advice when drafting up the various documents required to successfully maintain your property.