- September 12, 2014
- By David Smith
- 0 comments
New Model Tenancy Agreement- A Review
The DCLG has just released the long-promised model tenancy agreement for Assured Shorthold Tenancies. So what is it like? Should agents and landlords stop paying for other agreements and just use this one?
Well first it is a long document at 44 pages. This is partly because is includes a great deal of guidance in the body of the document for tenants and landlords on what the clauses actually mean. This is a positive idea as many people find the clauses in a tenancy agreement confusing even when we do our best to use plain English. However, I am not sure that a lot of people ever actually read this stuff at all so on balance I think I still favour a shorter tenancy agreement with a separate tenant guide that refers back to the specific clauses in the main agreement. This new independent tenant guide from Nationwide is a good example of what can be done. There is a landlord’s one too provided by their buy to let lending arm, Mortgage Works, in case anyone feels left out!
Back to the model agreement. It is being provided both as a Word document (which could of course be customised to gain the best of the agreement and fix any issues) and as an Adobe PDF.
The initial guidance as to when the agreement should or should not be used is a little bit unclear. It does not mention that it is not suitable for higher value tenancies of over £100,000 in rent per annum although I would be worried about anyone with a property that valuable using this agreement anyway! The statement about not using this for a letting to a company is also less than clear as it refer to these oddly as business tenancies. I would also have thought it sensible to include a clear statement that the agreement is not suitable for use in Scotland and Northern Ireland. Or Wales from 2016 but that is another story.
The agreement also includes a very nice checklist at the start to help landlords do all the things they need to comply with their responsibilities.
Deposits- Watch Out!
This agreement does nothing in respect of ensuring that you comply with your tenancy deposit obligations. You will need to obtain a serve the deposit prescribed information separately.
Longer Fixed Terms
The agreement is claimed to be about encouraging longer fixed terms. However, there are limits on its use for that purpose. The agreement can be used for tenancies of 3 years or more which should be signed and executed as deeds and it has a guidance note on that issue. However, it is not suitable for a lease of 7 years or more as these must be compulsorily registered with the Land Registry and this agreement is not structured in a way that easily allows for that. This should probably be made clearer.
The First Part
The first thing that I notice is missing is an execution date. Also called a binding date it is the date at the top of the agreement that sets out the date the agreement is made from. It is often the same as the start date of the tenancy but does not have to be. It is actually quite important, especially for a deed, as it is the process of executing the agreement that brings it into force. If the agreement is being entered into before the tenant actually moves in then an execution date is pretty vital.
The definitions and interpretation are also pretty weak. There is a lot missing here and it would also be good practice to state that the guidance notes do not form part of the agreement. Otherwise the agreement itself should be read as if the various guidance notes were part of it. This may be what the government intend but that is a fairly dangerous position as the guidance notes may well not express the law well.
The agreement is quite good in terms of setting out the permitted occupiers and the allowed maximum number. This prevents overcrowding and the risk of the property becoming an HMO inadvertently. It is common here to have a clause stating that the property is for the use of the tenant’s family only for the same reasons but this has not been done. It makes the agreement more generic but loses landlords a key element of protection.
There are various rent increase options but they all rely on a percentage-based increase. This is the easiest but not always the best in an unpredictable market. There is an obligation on the tenant to pay the rent but importantly it does not specify that the rent must be paid whether or not it has been demanded or that it must be paid on the due date in cleared funds. If a tenant was paying by cheque therefore a cheque supplied to the landlord on the date mentioned in the agreement would satisfy the terms without actually giving the landlord the money for 5 further days in most cases.
The agreement specifies the utilities payable. However, there is nothing in there about the tenant compensating the landlord for paying any council tax on the tenant’s behalf. Given that this agreement is intended to be available for use in bedsits I am not sure that this is wise as they may well involve the primary council tax liability falling on the landlord.
The tenant’s obligations are much as one would expect and are pretty well written. The landlord’s obligations are however very brief. I would normally write an agreement with a much more detailed set of obligations for the landlord. Given the brief t produce a balanced agreement that protects tenant’s rights this is a little thin.
There are model break clauses in the agreement which are for terms of over 2 years only. That said the agreement could be easily adapted to make them available in all tenancies. The model of these is a bit odd and somewhat gives the lie to the government’s statements about longer tenancy terms. The agreement includes a standard break clause after 6 months occupation and also a rolling 3 month break clause. If the government is serious about encouraging longer tenancy terms then why is it so prepared to include 6 month break clauses in its model agreements? Break clauses are in fact more pernicious than short tenancy terms as they create a situation where the tenant has the perception of a longer term but they in fact only have security up until the break clause can be activated. This model does improve things a little over the normal position in that the rolling break clause requires 3 montsh notice instead of the usual 2 and the 6 month break clause (which only requires 2 month notice) is a one-off, use it or lose it, break.
The notice service clauses are good and are often absent from other free agreements so this is positive. However, there is a clause allowing for email service of notices. I normally shy away from these as it is still far too unreliable as a service method and the Court is less than clear about its position on them.
So Should You Use It?
Well it’s free! Compared with other free agreements its pretty good and if I had no better choice then I might well use it. However, I don’t really think it is suitable for a longer term tenancy as is suggested. In a longer tenancy the agreement should be even more comprehensive and watertight than usual. Not just for the landlord’s benefit but because the parties are bound to one another for a long time and so any lack of clarity has more chance of causing dispute.
I don’t doubt that some landlords will use this agreement, if only to save some money. I also expect that at some point I will be arguing about what various parts of it mean in Court! As a concept that may cause the industry to rethink the way it structures agreements it has a lot of positive ideas. It also provides, as it set out to do, a pretty fair balance between both sides. However, there are plenty of other agreements that also do the same thing. The detailed guidance for one thing. However, I would not be inclined to use it in the current form. That said, with a small amount of work by a competent lawyer it could be made very good indeed
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