Residential Tenancy Agreements

A look at the different types of residential tenancy in England and Wales

An occupier (or group of occupiers) of residential property who enjoys exclusive use or possession of his accommodation will normally classify as a tenant and will have important rights in law. By comparison, there are other types of occupation which enjoy significantly less rights (such as licencees and trespassers) but these will not be dealt with further here. 

For the landlord, it can be very important to understand exactly which type of tenancy has been granted to the tenant.  When bringing a possession action, the type of tenancy will determine which notices need to be served. 

Assured & Assured Shorthold tenancies: 

Most tenancies (in the private sector) will, nowadays, be granted as assured shorthold tenancies but it will not be safe to simply assume that this is always the case.  There are a number of important exceptions, such as tenancies with a resident landlord, lettings to companies, and lettings at high rent (i.e. over £25,000 rent per annum) - these are discussed further below (see ‘Exclusions') and in the flowchart on the final page.

Assured Shorthold Tenancy (AST)

The Housing Act 1988 introduced a new class of tenancies called assured tenancies, which include the assured shorthold tenancy, and the ordinary assured tenancy.  The assured shorthold tenancy is the standard form of letting for tenancies which began on or after 28 February 1997.

If the landlord lets a property on an assured shorthold (AST), he is entitled to, and guaranteed, the right to regain possession at the end of the term subject to the statutory notice requirements:

• the landlord must give 2 months' notice that possession is required

• possession will only be awarded after six months

The AST tenant may apply to a rent assessment committee to have the rent reduced if he considers the rent to be significantly higher than the rent for comparable tenancies in the area. With effect from 28 February 1997, the AST is the default or automatic tenancy, and it is no longer necessary to serve a separate AST notice (s.20) on the tenant.

Ordinary Assured Tenancy

With the ordinary assured form of tenancy, the tenant enjoys greater security of tenure and this type of tenancy is still used by many public sector landlords such as housing associations.  The tenant has the right to remain in the property unless the landlord can prove particular grounds for possession.  There are seventeen such grounds provided by the Housing Act 1988.  The most common grounds that may be utilised are:

• that the landlord wishes to move back into his own home

• that the tenant is in arrears with his rent

• that the tenant has broken one or more of his obligations under the tenancy

• that the tenant, or his visitors, is guilty of causing a nuisance

The landlord has no automatic right to repossess the property when the tenancy comes to an end as with an AST. Also, the ordinary assured tenant has no equivalent right to refer the rent to a rent assessment committee during the initial agreed tenancy. Tenancies set up after 15 January 1989 and before 28 February 1997 were automatically deemed to be ordinary assured unless the landlord served a specific notice (the s.20 notice) on the tenant.

Exclusions from the Housing Act 1988: 

Several specific categories of tenancy are excluded from the legal framework for assured tenancies established by the Housing Act 1988.  These include situations where : 

• the tenant is not an individual (e.g. lettings to companies, see below)

• the landlord is a resident landlord

• the tenancy is a business or holiday let

• the tenancy is for licensed premises

• no rent is payable, or a very low or very high rent is charged

• the tenancy is an agricultural tenancy, or includes agricultural land

• the tenant does not occupy as his only or principal home. 

In these cases (and a few more obscure situations), considered further below, the tenancies will operate as 'common law' tenancies or 'contractual tenancies' since they are mainly governed by contract law and the common law rules.  (A full list of the excluded types of tenancy is given in Section 1 and Schedule 1 of the Housing Act 1988). 

Common Law tenancies: 

Resident landlords

A landlord who lets part of his home to a tenant is classified as a ‘resident landlord'.  This type of tenancy will operate outside the protection of the Housing Act 1988 as the intention is to give a resident landlord stronger rights than the average landlord letting under assured tenancies. 

The tenancy will operate fundamentally under common law rules and cannot be assured or AST.  This rule normally applies to converted houses (including those divided up into flats).  Thus, the landlord does not need to share any accommodation with the occupier to qualify for resident landlord status.  It is enough that both landlord and tenant live in the same building.  If, however, the property is a purpose-built block of flats and the landlord simply lives in one of the flats in the block, this will not qualify for ‘resident landlord' status; the tenant would occupy as an assured or assured shorthold tenant. 

Holiday lettings

Schedule 1 of the Housing Act 1988 states that 'a tenancy the purpose of which is to confer the tenant the right to occupy the dwelling-house for a holiday' cannot be an assured tenancy.  Holiday lettings can typically range in type and duration from as short as a weekend to as long as several months.  A holiday letting agreement operates fundamentally under contract law and so the tenant of a holiday letting has few rights of tenure and the possession procedure is much simpler than for a standard residential tenancy.  All that is necessary is that the landlord is satisfied that the purpose of the letting is genuinely for the purpose of a holiday so that there should be no possibility of an occupier remaining in possession and claiming residential tenancy rights.

Tenancies of agricultural land & agricultural holdings

Agricultural tenancies and lettings which include more than two acres of agricultural land are generally excluded from being assured tenancies.  For further information on agricultural tenancies see Letting Factsheet No. 33 on Business, Agricultural and Mixed Use Tenancies.

Tenancies at low rent or high rent

A tenancy cannot be an assured tenancy if either no rent is payable, or if the rent is below a certain threshold. Low rents are, at the time of writing, defined as:

where the rent is either less than £250 a year (£1000 a year in Greater London) for tenancies entered into after 1st April 1990, or  where the annual rent is less than two-thirds of the rateable value of the dwelling-house (see full text of Act) for tenancies entered into on or prior to 1 April 1990.

Under the Housing Act 1988,  tenancies where the annual rent is greater than £25,000 cannot be assured (or AST).  It is to be noted that the £25,000 figure is annualised and, therefore, if the proportional monthly rent is more than £2083.33 per month for a shorter term (e.g. only six months), the letting is still outside the Housing Act 1988. Generally, these tenancies operate primarily under the common law rules and have little statutory security of tenure.  The tenancy will simply be of a contractual nature between landlord and tenant with few statutory provisions.

Business tenancies

Lettings to a company and business tenancies both operate outside the Housing Act 1988, and will, therefore, exist as forms of common law tenancy.  However, a number of statutory provisions exist to give protection to business tenants.  For further information on business tenancies see Lettting Factsheet No. 33 on Business, Agricultural and Mixed Use Tenancies.

Licensed premises

A tenancy under which the dwelling-house consists of or comprises premises licensed for the sale of intoxicating liquors for consumption on the premises will not be an assured tenancy.

Crown tenancies

A tenancy under which the interest of the landlord belongs to Her Majesty in right of the Crown or to a government department will not be an assured tenancy.

Lettings granted by specified educational bodies to students

A tenancy which is granted to a person who is pursuing, or intends to pursue, a course of study provided by a specified educational institution and is so granted either by that institution or by another specified institution or body of persons will not be an assured tenancy (exclusion does not apply to a letting to students by a private landlord).

Local authority tenancies, etc.

Public sector housing deals predominantly with lettings by local authorities and housing associations.  Lettings in the public sector are known as 'secure tenancies' because they generally provide the tenant with a high degree of security of tenure compared with private sector tenancies. 

Until comparatively recently (1980) such public tenants were outside all forms of statutory regulation on the basis that public sector landlords had no profit motive and, therefore, their tenants did not need legal protection.  "Secure" tenancies have since been introduced by the Housing Act 1980 although the provisions have subsequently been consolidated into the 1985 Act.  Many local authorities have transferred their housing into housing associations (also known as "registered social landlords").  In 1980,  registered housing associations were brought within the concept of the "secure tenancy".

Pre 1989 Statutory Tenancies: 

The Rent Act 1977 introduced a new form of tenancy - the 'protected tenancy'.  This was a contractual tenancy in which the tenant had the right to a fair rent and security of tenure.  Protected tenancies have been replaced by assured tenancies under the Housing Act 1988 and, consequently, the Rent Act will generally only apply to tenancies created before 15 January 1989. Protected tenancies already in existence continue to have protection.  Once the contractual tenancy has come to an end, the tenant gains security of tenure as a statutory tenant, on basically the same terms as the prior contractual tenancy and with an absolute right to continue living in the premises indefinitely. 

Mixed Use Tenancies: 

With more people working or running a business from home, there are an increasing number of tenancies which classify as ‘mixed use' tenancies (i.e. where there is a degree of both residential and business use).  This situation can be complex, and the type of tenancy that exists here will depend on a number of factors including the degree of business/residential use and the intents of the parties when the tenancy was created.

For further information on mixed use tenancies where there is both residential and business use of a property see Factsheet  on Business, Agricultural and Mixed Use Tenancies. 

Sources for Further Information:

• The Department of Communities and Local Government's website at www.dclg.gov.uk
• Housing Act 1988 - Copy of the Act on the Letlink website (see below)
• The Letting Centre, website:  www.letlink.co.uk

This summary is intended to assist landlords and letting agents to understand the basic rules for residential tenancies but it is not intended to be a comprehensive statement of the law.

TENANCY FLOWCHART