The Renters Rights Act (when it comes into force) will make it a requirement for all landlords of tenancies subject to the act to give tenants a ‘written statement of terms’.
In most cases, ‘written statement of terms’ means a tenancy agreement.
This must be given to tenants ‘before the tenancy is entered into’.
Failure to do this will make the landlord vulnerable to a Civil Penalty Notice for up to £7,000.
Can You Still Create a Tenancy Without an Agreement?
Note that the act will not be saying that you can’t create a tenancy without a tenancy agreement.
Under section 54(2) of the Law of Property Act, the usual rule that ‘interests in land’ must be created by deed will not apply where there is a term of less than 3 years.
Which, of course, will always be the case after the act has come into force, as all tenancies will automatically be periodic tenancies of one month or less.
So this new Renters Rights Act requirement will not prevent you from creating a tenancy.
Why the Timing of the Agreement Matters
However, if you don’t give the tenants a tenancy agreement before the tenancy starts, you can be fined.
The reason for this is that the government want to penalise rogue landlords who fail to provide proper documentation to tenants. However, if you are a serious landlord, having a tenancy agreement signed before the tenants go in is probably more important to you than it is to your tenants.
A tenancy, as well as being a legal interest in land, is also a legal contract. The tenancy agreement is where you find the terms of that contract.
It has long been a legal principle that you cannot impose terms and conditions after a contract has been made. This is best explained in the 1971 Lord Denning decision in the case of Thornton v. Shoe Lane Parking.
The Thornton v Shoe Lane Parking Case
In this case, drivers paid for their parking and were given a ticket at the barrier. The ticket had printed on it “This ticket is issued subject to the conditions of issue as displayed on the premises”. The terms and conditions were then set out on a notice inside the car park.
However, Lord Denning held that this was too late. The contract had been concluded at the barrier, and the company could not impose terms and conditions after that. The driver had not had an opportunity to read them, and indeed, before being given the ticket, probably had no idea they existed.
Key Protections Found in Tenancy Agreements
The same is the case with tenancies. Most professionally drafted tenancy agreements will contain terms which are there for the landlord’s protection. For example:
- Providing for the rent to be paid at the start of the rental period rather than in arrears (as is the default position)
- Including deposit clauses, without which in most cases landlords will fail at adjudication if tenants dispute deductions
- Requiring the tenant to use the property as their only or principal home
- Forbidding smoking in the property
- Limiting the number of occupiers
- Providing for inspection visits
- Notifying tenants of grounds for possession
- And so on.
The Risks of Not Providing the Written Agreement in time
If you don’t provide your tenant with a form of tenancy agreement before the tenancy starts and get them to sign it before you give them the keys, these terms will not be enforceable against them.
Which could cause you big problems during the tenancy.
What landlords should do moving forward
For this reason, as well as because of the threat of a penalty charge notice fine, all landlords should always take care to give tenants a properly drafted tenancy agreement. And get them to sign it before the tenancy starts.
You should also take enormous care in your choice of tenancy agreement. Make sure it takes into account all the other requirements of the new act.
For guidance on the new rules for tenancy agreement terms, see my earlier article here.