Unwritten tenancy agreements offer some protection, but not enough
A tenancy agreement is effectively a list of terms and conditions which both the landlord and tenant agree to uphold. While we might commonly refer to these as ‘clauses’, many are, in legalese, ‘covenants’. When a tenant moves from a fixed-term tenancy to a periodic tenancy, these covenants automatically rollover.
However, not all obligations have to be in writing. Short-term contracts of less than three years can be made verbally (though we would never recommend doing so – it’s always best to ‘have it in writing’). There may also be implied terms associated with a tenancy – and this is especially true of unwritten leases.
This may all sound a little confusing. The law often is. After reading this article, you will be more informed – and an informed landlord should be a profitable landlord.
What are covenants?
A covenant is a promise made by one person to another. In the case of a tenancy agreement, most of the covenants in it are promises made by the tenant to the landlord, though some work the other way. There are two types of covenant:
- Restrictive covenants, which prevent the promiser from doing something. For example, a restriction on keeping pets in the property, or parking commercial vehicles there (covenants made by the tenant to the landlord). The landlord may have a covenant restricting him or her from contacting the tenant at certain hours, or in a certain place (at work, for example).
- Positive covenants, which make the promiser do something. For example, the tenant may be required to pay rent of a certain amount by a certain date each month (d’oh!), while the landlord may be required to keep the property in a good state of repair (double d’oh!).
What if the tenancy agreement hasn’t been drawn up when the tenant moves in?
There might be occasions when a landlord is prepared for a tenant to move into their property prior to a tenancy agreement being drawn up. For example, if the tenant has been vetted and passed as fit, but needs to move into the property quickly. While we would usually caution against this, the law does provide some protection to both you and the tenant by what is known as ‘implied terms’.
What are implied terms?
Implied terms are obligations which the law deems as appropriate to the tenant and landlord. Between landlord and tenant, the main implied terms are:
- For the tenant to pay rent
- For the tenant to use the property in a ‘tenant-like manner’
- For the landlord to keep the property in a good state of repair
- For the landlord to allow the tenant ‘quiet enjoyment’
You’ll notice that these are, in effect, unwritten covenants, because they provide both the tenant and landlord with obligations.
In the case of the implied terms on the tenant, these come from common law – it is generally accepted that the tenant must pay a rent to live in the property and that they will look after the property while living in it.
In the case of the implied terms on the landlord, the first comes from statute law (specifically the Landlord and Tenant Act 1985, Section 11). Even if you have a tenancy agreement without a specific covenant detailing your obligation to keep the property in good repair, it is implied that you will.
The second implied term on the landlord (to allow the tenant quiet enjoyment) comes from common law. It simply means that you cannot enter the property or disturb the tenant’s enjoyment of the property without their permission. If you do so, you’ll be trespassing and could be prosecuted – read our article “What are the landlord’s rights to enter their buy-to-let?” for an explanation.
What if the tenant moves in and you can’t agree on a rent?
Let’s say that you move a tenant in, ahead of signing a tenancy agreement, and you cannot agree on a rental price. The tenant refuses to pay what you ask.
The good news is that the tenant cannot remain on the property without paying rent, because the implied terms say that they must pay rent.
The bad news is that the rent charged will now be left to the court to decide. They will look at various elements and factors, such as the condition of the property, location, and items included in it, and compare to rental prices in the local area to determine a reasonable rent. At best, you’re likely to get what you ask for. At worst, you’ll be awarded a lower rent.
And what if that tenant decides not to pay and simply moves after the court decides in your favour? Then you may have a lengthy and expensive fight to be paid what you are owed.
You may believe you are doing a prospective good tenant a favour by allowing them to move into your buy-to-let property without a written tenancy agreement in place, but is it worth the risk? We think not, despite the implied terms associated with such a verbal agreement. It’s much better to have the tenancy agreement in writing, with covenants that detail all responsibilities, expectations, and obligations.
Do you have any questions about your legal obligations as a buy-to-let landlord? Get in touch with the team at Ezytrac on +44 0 1522 503 717and we’ll give you the answers you seek.
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