Perhaps you are tired of short term leases and want to sign a tenant in a tenancy agreement for a longer period of time. A long-term tenancy agreement may be the solution for you.
But what exactly is a long-term tenancy agreement and how does it differ from a standard lease?
In this article, we’ll delve into the details of long-term tenancy agreements and explore the pros and cons of this type of rental arrangement.
We’ll also discuss how to navigate the legalities of a long-term tenancy agreement and how to find the right property for this type of arrangement.
What is a long term tenancy agreement?
A long term tenancy agreement usually refers to tenancy agreements that are a minimum of 6 months up to 12 months in length. This means the break clause in the agreement is after at least 6 months before anything can be renegotiated.
What are the rights and responsibilities involved in long term tenancy agreements?
In a long term tenancy agreement, a landlord and tenant have a duty to abide by the regulations set out by the government here.
They state that a landlord has the right to provide tenants with the right to reside in a property that is safe and well-maintained, and receive the return of their deposit at the end of the tenancy.
Also, they should potentially have their deposit protected, be able to contest excessive fees, be aware of their landlord’s identity, and have privacy in the property.
Adding to this, they should be able to view an Energy Performance Certificate, and be protected from unjust eviction and rent increases. If your tenancy has a fixed term of over 3 years, tenants should have a written agreement.
How long should a long term tenancy agreement be?
A long term tenancy agreement should be between 6 and 12 months in order to qualify as one. However, this is up to the agreement with the landlord and tenant and a landlord could ask for a longer fixed term.
In some cases, a fixed term can go on for longer and be up to 12 months long and even go up to a few years, especially in leases where a family or a group of people want to live in a property for a long time.
This is common in rental agreements like build to rent where typically someone will rent out a premises for a long time spanning years or decades.
After a long, fixed term of a tenancy agreement comes to an end, then the tenancy can move on to a periodic tenancy which is where rent is paid every week or month up until an undisclosed date.
Long term tenancy agreements in England and Wales
In England and Wales, a typical AST is used in order to introduce a tenant to a long term tenancy.
You can use our tenancy agreement template download on our website or sign up to Lofti below where you can manage your first five tenancies for completely free.
Long term tenancy agreements in Scotland
In Scotland, you sign a long term tenancy agreement slightly differently than in England and Wales as you have to sign a Private Residential Tenancy agreement (PRT) instead.
They are different because PRT is more secure for a tenant as the landlord cannot ask the tenant to leave at the end of the fixed term because there is no fixed term.
Nonetheless, there are still valid reasons for a landlord to evict a tenant, the rules just don’t have at the end of a fixed term as one of these reasons. Find out more about these Scottish rules here.
Express terms of a long term tenancy agreement
A long term tenancy agreement will have express terms in the agreement like any other tenancy agreement. These refer to what is recorded in the document of a tenancy agreement or verbally agreed
Implied terms of a long term tenancy agreement
Implied terms are also part of a long term agreement. It is important you’re familiar with implied terms as there is a good chance you’ll run into them if you are renting out a property for a long time to one tenant in a long term agreement.
These refer to arrangements that are a result of best practices and being morally correct rather than having anything specifically written in writing. They don’t need to be written anywhere in a long term agreement.
For example, an implied term would be for tenants to give access to a property for viewings if they are moving out. A tenant can legally refuse but it is implied to be best practice as a gesture of respect to a landlord.
In general, implied terms can be great if you’re able to maintain a good relationship with tenants as it is likely the tenant will comply with the terms given they are reasonable,
What are the pros and cons of long term tenancy agreements?
You may wonder if it is worth signing a tenant in a long term agreement rather than a short term one. Below the pros and cons will be evaluated so you know what kind of agreement is best for you.
Advantages of long term tenancy agreements
From the stable amount of income you get in a long term agreement to the little time and effort you have to put into managing a long term tenancy, there are a few pros that give long term agreements an advantage over short term ones.
Income is more stable
As a landlord, having stable income is vital for the life of a property business. This is because void periods of rent can impact the rental yield over the course of a year and prevent a landlord from meeting their mortgage payments.
Especially where a landlord has a large amount of debt, a small period where there is no tenant can cause a lender to have to repossess a property
Lower maintenance costs
Whenever you have a tenancy that doesn’t last as long, there has to be regular cleaning in between tenants. This means those who are managing a property will have a higher overhead cost.
This is common in furnished holiday lets where tenants may just spend a few weeks in the property and it is up to the landlord or someone working on behalf of the landlord to clean.
However, this is often solved by raising the rents for tenancies that aren’t long term. Having said this, for a landlord that is new, they may still get caught out with this additional cost.
Little time and effort required
In general, long term tenancies have tenants who are comfortable in their space and aren’t likely to complain if they have been living in a space for a long period of time.
In addition to this, tenants who stay a while will take better care of a property as they view it as their home rather than somewhere they are staying temporarily. This can benefit a landlord tremendously.
Disadvantages of long term tenancy agreements
While there is less maintenance and more stable, long term rents, there are also some cons you have to worry about as a landlord looking to sign a tenant with a long term tenancy agreement.
The security of long term income is great. However, if you want to move a tenant around or raise the rents, this can prove difficult for a tenant who is in a long term tenancy.
Although you can raise the rents legally with a section 13, this can only happen once a year and has to be done within a certain amount that is considered fair rent based on the average rent for the area.
On the other hand, if you find a new tenant you can sign them with a new rent as many times as you’d like as it is a separate tenant.
For example, you cannot raise rent from £500 then to £600 for one tenant in the same year but you can sign one tenant for £500 per month and then find another tenant for £600 after a few months.
Lower rental price
Rent can be hard to price higher if you are renting out for the long term because tenants who sign longer leases often look for a subsidised price as a result.
On top of this, there is simply less demand for tenants looking for a long term tenancy. This means landlords have to compete on price if they’re looking to sign a tenant for over a year.
Renting out a property in the shorter term and finding a few tenants could produce more profit for a landlord but this also results in more maintenance throughout the tenancy.
Even using other forms of renting out a property such as lodger agreements which are usually forms of excluded tenancy agreements may produce a higher rent in the short term
How to decide on how long a tenancy agreement should be for a tenant
When a landlord is writing a tenancy agreement, the length of the fixed term of the agreement will determine how long the tenancy agreement is for.
The length of this agreement should be decided based on the preferences of a landlord.
The decision should be made based on the following factors:
- How involved the landlord wants to be in the maintenance of the property
- If the landlord is okay with reducing the rent
- What the rental demand is like in the area
How to make sure you’re making the right decision for you
There are additional steps to take if you’re particularly concerned with coming up with the right length of a tenancy agreement. You can speak to solicitors of property managers to help advise you.
In addition, signing up to lofti below will allow you to take part in our tenancy referencing process which will help you determine how long you’d want to keep a tenant in your property.
Tenants that have a better application also are eligible for rent guarantee insurance which will make sure you’re covered in the event of a tenant not paying rent.
What other else do you need to be aware of about long term renting?
Long term agreements are essentially assured shorthold tenancies that go on for longer and may have a longer fixed term. But what else should you know about?
Read on below on how to end a long term agreement and the different legalities you have to be aware of. Before you sign a tenant for the long term, it is vital you do as much research as possible.
Ending a long term tenancy agreement
Because long term agreements are for tenants who wish to gain a greater sense of security by signing for a longer lease, it may be harder to evict them.
This is because if the tenant is still in a fixed term of their tenancy agreement and you want to evict them as a landlord, you cannot do so.
For instance, if a tenant has a fixed term for a year before there is a break clause in the tenancy agreement, the most you can do as a landlord is wait for the break clause to come into effect or potentially try to negotiate.
However, the tenant is under no obligation to allow you to negotiate the contract and any breach of the tenancy agreement in protest of this decision by a tenant would be a reason for a tenant to sue a landlord.
Also, it is necessary for the landlord to give the correct notice period for the tenancy to end legally. This notice period varies depending on a few factors. Read our article on notice periods to work out the notice period you need to provide.
Can holiday lets be long term tenancy agreements?
Holiday lets are usually not a long term tenancy agreement because holiday lets must not be longer than 31 days. However, it is okay for a tenant to transfer their primary place of residence to somewhere they are renting for the long term.
For instance, if a tenant rented a new home for six months and they used this place as a holiday home, this would be how they can use a short stay as somewhere they are vacationing.
Tenancy deposit scheme
Tenancy deposits aren’t treated any differently if the tenancy agreement is a long term agreement. A landlord should follow the same process of storing the deposit in a secure tenancy deposit scheme.
Tenancy Deposit Scheme, you can find here is a good example where landlords and tenants can store their security deposit. Once this is used, a tenant cannot reclaim their deposit without prior approval from the scheme.
When looking at long term tenancy agreements holistically, it is important to note that they aren’t all too different to any other type of agreement, the only caveat being the fixed term is longer than most agreements.
As well as this, it is quite subjective as to whether a tenancy agreement is considered fixed term or not as there is no cut off point.
However you define your tenancy agreement, it is vital you consider the pros and cons of signing a tenant for the length of time you have chosen and follow the legal process of eviction, and complying with a tenant’s rights.
Making sure a tenant has the right documents when they rent is also vital to make sure a tenant is able to enjoy their tenancy legally and you don’t end up in court as a landlord.