In this part we are looking at the legal background to lettings. A most important, if often misunderstood topic!

A quick guide to landlord and tenant law for landlords

When you rent out property to a tenant they normally have an assured shorthold tenancy. But what is this? What does it mean?

Let’s take a quick look at some basic land law. Generally, land is owned in one of two ways. Freehold and leasehold.

• Freehold – is where you own the land indefinitely (unless you decide to sell it or ownership is changed for some other reason).
• Leasehold – is where the land is owned by someone but only for a specific period of time (known as a term). Another name for a lease is a tenancy. To a certain extent the words are interchangeable, but in most cases when you say ‘lease’ you generally mean a long lease (e.g. for 99 years). When you say tenancy, you generally mean a short let for six months or more.

Needless to say, this series is about tenancies.

The statutory codes

Most rented property today is governed by the Housing Act 1988. This is the act which set up the assured and assured shorthold tenancies and which regulates how they work. It applies to all tenancies which were created after 15 January 1989.

Before that, most tenancies were governed by the Rent Act 1977. You don’t really need to know about that, unless you own a property with a protected tenant, or are buying an investment property with sitting tenants (in which case you need to know what sort of tenancy they have).

Under the Housing Act 1988 two types of tenancy are created.

The first is an assured tenancy.

This is not popular with private landlords as the tenants have long-term security of tenure, which means that they cannot easily be evicted.

However, it is the standard tenancy type used by social landlords such as housing associations.

The second is the assured shorthold tenancy (AST).

This is actually a special type of assured tenancy. The ‘shorthold’ tenancy is one where the landlord can recover possession as of right, without giving any reason, provided

• the fixed term has ended,
• any pre-requisites have been complied with,
• the proper form of notice has been given and
• the notice period has expired.

The details setting out how this is to be done are to be found in section 21 of the act (which is why the notice is called a section 21 notice).

Landlords right to use the ‘no-fault’ section 21 procedure for eviction is likely to end fairly soon, when the Renters Reform Bill becomes law (if it becomes law).

When that happens, this e-course will be amended.

Early tenancies

Under the 1977 Rent Act it was often impossible to recover rented property through the courts – which is why so few people were willing to be landlords at that time.

Between 15 January 1989 and 27 February 1997 the ‘default’ form of tenancy was the assured tenancy. At that time in order to create a shorthold tenancy you had to comply with certain conditions, which included

• having a fixed term of not less than six months and
• serving a special form of notice.

Under the Landlord & Tenant Act 1996, from 28 February, these preconditions no longer applied, and since that date, the ‘default’ type of tenancy has been the assured shorthold tenancy.

So again, you don’t need to worry about the old, pre 28/2/1997 tenancies unless (again) you have one or more assured tenants or are buying an investment property with sitting tenants.

What the Housing Act 1988 does

There are really five things which you need to know about the Housing Act.

1.  It sets out the type of tenancies which it applies to.

This will generally be all tenancies except

• those granted to limited companies,
• tenancies where the annual rent is over £100,000 pa or under £250 pa (£1,000 in Greater London), and
• tenancies where the landlord is living in self-contained accommodation in the same building.
• (There are others, but they are not likely to apply to you)

Tenancies which are not covered by the act are generally known as unregulated or ‘common law’ tenancies. If you want to see a complete list, this is set out in Schedule 1 of the act.

2.  It provides for tenancies to ‘run on’ after the end of the fixed term.

Although, strictly speaking what happens is that a new ‘periodic tenancy’ is created immediately after the end of the fixed term. The rules for this are set out in section 5 of the Act.

So, for example, say you have a tenancy where rent is paid monthly with a six months fixed term. After the fixed term has ended, a new periodic tenancy will be created which will run from month to month, under the same terms and conditions as the preceding fixed term tenancy agreement.

If you are happy for the tenancy to run from month to month (or from week to week if rent is paid weekly) it is not actually necessary to get the tenant to sign a new tenancy agreement. This type of tenancy is generally known as a ‘periodic’ tenancy. As opposed to a ‘fixed term’ tenancy.

It is proposed in the Renters Reform Bill that all tenancies be converted (when the new Act comes into force) into periodic tenancies.

3.  It provides a certain amount of rent regulation.

This is mostly concerning the notice that landlords can use to increase the rent if the tenancy is  ‘periodic’.

4.  It sets out the procedure for evicting tenants and the ‘grounds’ or reasons you can base your claim on.

These are set out in section 21 of the act (as discussed above) or in schedule 2.

The most important ground in Schedule 2 is the serious rent arrears ground, which you can use if your tenant is in arrears for two months / eight weeks or more.

To use the grounds in schedule 2, you must first serve a notice. This is set out in section 8 of the act (which is why the notice is often referred to as a section 8 notice).

5.  It sets out succession rules.

These say who is entitled to inherit the tenancy when the tenant named in the tenancy agreement dies.

However, for ASTs these are less significant as the landlord can, if he does not like the person entitled to succeed, serve a section 21 notice and evict the tenant.

What if your tenancy is a common law one?

For example, if it is a high rent or a let to a limited company?

In this case, the special rules set out in the Housing Act will not apply and the tenancy will be governed by the underlying ‘common law’.  Which is what was there before the statutes were passed to change it.

Basically, this means that there is no rent regulation and that the procedure to evict the tenants is slightly different.

Also, requirements which only apply to ASTs, such as the tenancy deposit regulations will not apply.

Housing Law in Wales

Under the Renting Homes (Wales) Act 2016, tenancies and residential licenses are, so far as is possible, treated the same.  They are collectively referred to as ‘occupation contracts’ and tenants/licensees are referred to as ‘contract holders.  

Tenancy and license agreements are collectively referred to as written statements of occupation contract, and there are strict rules about their use and contents (which we will look at later).

With effect from 1 December 2022 when the act came into force, all Welsh tenancies, apart from those referred to in Schedule 2 of the Act, were converted automatically to occupation contracts.

The exceptions in Schedule 2 include protected tenancies under the Rent Act 1977 and lodger situations.

Other laws

The Housing Act 1988 (and the Welsh Renting Homes Act) are not, of course, the only acts which applies to tenancies! There are lots of other laws, for example, regarding the condition of the property, tenancy deposits, houses in multiple occupations, consumer protection and the like.

There are also a lot of regulations on all sorts of areas – property standards, health and safety (such as the gas regulations), unfair clauses in tenancy agreements and so on.

I will be looking at some of these later in this e-course.