Choosing a tenancy agreement can be confusing. Our guide below looks into the different types of tenancy, so that you can choose the tenancy agreement that best suits your needs.
Which tenancy agreement is right for you?
Firstly, a tenancy agreement is a written or verbal agreement between a landlord and a tenant that sets out the specific rights for both, such as a tenant’s right to live in a landlord’s rental property and a landlord’s right to receive regular rental income in return for letting out their property.
Top tip: A written agreement is always preferable as it could help ensure that the rental conditions agreed between landlords and tenants are fully understood and fair for both.
Types of tenancy agreements
- Assured Tenancy
An Assured Tenancy offers more security than other types of tenancies. Housing associations often rent out properties using this type of tenancy. If you are just starting out and looking to rent your property, this would not be the type of tenancy for you.
For it to be an assured tenancy however, the following below must be met:
- tenant must occupy the property as their only or main residence.
- tenant must be an individual, not a company.
There are three types of assured tenancy:
- Fixed term – typically for six or 12 months.
- Periodic tenancy – the tenancy rolls on for an indefinite period.
- Statutory periodic tenancy whereby the initial fixed term has ended, and the landlord hasn’t agreed to a new fixed term with the tenant.
- Assured Shorthold Tenancy (AST)
This is the most common form of tenancy in the UK. Most new tenancies are automatically this type.
The main difference between an AST and the other types of tenancy on this list is that there is limited security of tenure and landlords can evict tenants without a reason, although the correct procedure must be followed for it to be legal.
Everything that applies to Assured Tenancies is also applicable to ASTs.
Your property cannot be an assured shorthold tenancy if:
- The tenant is a lodger
- The rent is more than £100k a year
- The rent is less than £1k a year in London or £250 outside of London
- The property is commercial
- The property is a holiday rental
- Non-assured shorthold tenancy
This type of tenancy can only be used in situations where an assured shorthold tenancy cannot be used. This may 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 (if you do not share any facilities).
- Excluded tenancy
This typically applies to lodgers who live with the landlord and share facilities. Excluded tenancies do not give the tenant as many protections as an assured shorthold tenancy. You do not need to protect your tenant’s deposit in a government-approved deposit scheme, and you can usually evict the tenant without a court order and without giving four weeks’ notice, as long as you adhere to the tenancy agreement.
- Company Let
This is where the landlord lets a property to a company rather than an individual. This type of tenancy is used when a company rents a property for its employees. It is often found in cities like London where there are a large number of people working for large corporations.
With a company let, the company is responsible for meeting the financial obligations under the terms of the lease, rather than the individual living in the property.
Company lets can be valuable for a landlord, as many larger companies prefer to make advance rental payments, sometimes 2-3 years in one payment.
An assured shorthold tenancy in most cases is the right agreement for a tenant renting your property to be their permanent home, whether it is a room in a shared house or the entire property.
The main exception applicable to some landlords is when the tenant is a lodger, and they share the landlord’s facilities.
If you are not sure which tenancy agreement is right for your situation, read more on gov.uk’s tenancy guide.