Whenever you consult with estate agents in Lee and your house or flat in Lee is of very high value, he or she might suggest having an agreement which keeps you in the position of control. Your tenants will be paying the rent and you must choose the right document as it is a crucial part of the process.
However, in order to understand things better, you must have a clear understanding of the terminology of the industry.
Difference between tenancy and lease
In terms of law, there is no difference between the terms ‘tenancy’ and ‘lease’. But when it comes to letting residential properties, ‘tenancy’ is commonly used and when it is about commercial occupancy, ‘lease’ is the word that is used.
For the same reason, the same terminology is used whenever any residential tenancy agreements and business property leases come into action.
License for residences and tenancies
A tenancy is known as the exclusive right to occupation of a residential property. According to the rules and regulations, the landlord cannot step into the property without permission or without a very good reason.
However, a license allows more permission for using a property for a particular pre-determined and pre-agreed purpose only. The contract for each records these different terms of the deal.
What happens if someone uses the wrong type of documents?
There are certain rights of tenants, and they cannot be removed from the property by the use of a license agreement if the case is that of a tenancy.
Some landlords have realized that license agreements lack some of the onerous terms in them, unlike tenancy agreements. Most particularly when it comes to ending one agreement. This is when they make the mistake of making use of a license agreement.
But, the real test of whether one has a license or a tenancy does not depend on the terms written in the contract or whether you are renting out a room to someone or an entire property. Instead, it depends on how the deal is working in practice.
However, in cases where wrong types of documents are used, the effect is mostly seen in the form of tenants being able to exercise all of their rights but the landlord losing out on a lot of their rights. This includes those relating to also being able to see possession without having the tenant at fault. If a license agreement is used, then many protections that a landlord is supposed to be provided by the law are inapplicable.
Hence it is not only crucial to choose the right kind of documents but also to have documents which will protect you properly within the frameworks of the law.
What is the suitability of a license agreement?
If the person letting the property is sharing the same on a temporary basis, then a license is the best option available. In such a situation, the one holding the license does not have the exclusive occupancy of the property or even of the property that is his or her part.
Let’s say for example a license agreement can be used in these cases:
- When you have a lodger in your home
- If you are providing a hostel type service
- If the kind of accommodation is a short-term holiday accommodation
For a residential license agreement, it will not be suitable under the following circumstances:
- The landlord does not inhabit the property for the majority of the time
- If use of facilities such as cleaning facilities and spaces like a lounge is not shared with the landlord.
- Parts of the property such as a bedroom are for the exclusive occupation of only the tenant and not of the landlord.
- If the tenant is able to invite someone else to live with him or her
- If the tenant is able to lock the landlord out of his room or her room.
Usage of a tenancy agreement
Whenever you are letting residential property, you will be in need of a tenancy agreement for the same. An assured short hold tenancy agreement is the most common type of agreement used in such scenarios and it is abbreviated as AST.
Under any AST, there are certain rights and rules that both the landlord and the tenant are to follow:
- The landlord cannot enter the property without getting permission in advance and the tenant has the exclusive occupation right on all or part of the same property.
- For the entire term of the tenancy, the landlord will charge a fixed amount in the form of rent which is usually the market rent amount.
- The special rules are applicable when the notice period is being served in order to obtain possession or even when the agreed-upon term has expired.
When should one not use an AST or Assured Shorthold Tenancy agreement?
There are certain situations when an AST is not the ideal option and here are those times when it should not be used:
- If the rent of the property is more than £100,000 a year. In such cases, contracts that are regulated by the common law are to be used.
- In situations where the owner’s employment is somehow tied to the occupation of the property an agreement for service occupancy is to be used.
- In cases where a business is running from the property, a lease agreement for business property is to be used. If someone is working from home for any particular business, an ALT will work just fine.
- If the property in question has more than 2 acres of land that is used for agriculture, it comes under the use of agricultural leases.
To Conclude,
While there is not much difference between tenancy and lease, we can conclude from this guide that there are many practical differences in the way two of these terms are applied. Hence before searching for any tenants to let property or as buyers when looking for a property to rent, one should always check these details and find the right kind of agreement and documents in order to retain rights and be property by the law.
