A tenancy agreement serves, or should serve, three functions:
- To create the tenancy (ie it is a document of title)
- Set out all the terms of the agreement / contract, and
- Act as a guide / information document regarding the tenancy
1. A document of title
Under the Law of Property Act 1925, a deed is needed to transfer or ‘convey’ an interest in land from one person to another.
A tenancy is an interest in land, so one function of your tenancy agreement is to create this legal interest – the tenancy.
However this is also the least important function of a tenancy agreement as under s54(2) of the Law of Property Act you can actually create a tenancy for a term of not more than three years, without a deed.
Which is why if you let someone into your property on a handshake and start accepting rent, they will have a proper tenancy, even though they have not signed a tenancy agreement.
2. A legal contract
A tenancy is this weird combination of land law and contract law and the contract law part is all the terms and conditions which go into the tenancy agreement.
These are important for the smooth running of the tenancy and to protect the landlord’s interests.
- rent by default is payable in arrears unless you have a tenancy agreement clause making it payable in advance.
- if you do not have a proper tenancy deposit clause you will never succeed at adjudication – as you will not be authorised to make deductions from the deposit.
3. A consumer guide
This aspect is becoming increasingly important – ideally a tenancy agreement should be a sort of guidebook outlining the rights of the landlord and tenant in the tenancy.
To do this, your tenancy agreement needs to be written in plain English (rather than be stuffed full of jargon) and should include reference to all the statutory rights and obligations which tenants have under law (so readers will know that they exist).
Statutory forms of tenancy agreements along these lines will become mandatory in Wales in the next few years under the housing law changes happening there.
Whether or not this will also come to pass in England is unknown. However in the meantime it is considered good practice to make the tenancy agreement as user-friendly as possible.
In the past, drafting of tenancy agreements has focused more on creating legal documents – maybe intended more for lawyers to read than the parties themselves.
They were written in formal language and used a lot of ‘jargon’ – which are essentially legal short cut phrases which help lawyers understand what is meant but which tend to confuse the ordinary reader.
However, now more emphasis is being given on the tenancy agreement being an information document and guide for tenants (and also the landlord).
This is all part of the general trend towards taking a consumer approach towards residential short tenancies.