How to read a tenancy agreement

If you’re new to the property rental market, setting up a tenancy agreement for the first time can feel more complicated than it has to be. From legal terminology to finding the right agreement to suit your property investment needs, it’s easy to see why many property investors hire a property manager.

 

It doesn’t have to be this way. All you need is a simple understanding of the legal terminology to always keep you in the know.

 

As a professional landlord, there are 4 types of tenancy agreements that you need to be aware of:

 

Estate for years:

 

This is the most common of the 4 property leases, offering tenants a specified beginning and finishing date for their lease. The basis around this lease is to ensure you always have control of who lives in your rental property at what time. So when the lease expires, the tenant is expected to leave without the aid of a notice.

 

This lease is also perfect for controlling rent, allowing you to specify when you want to receive your rental payment.

 

If you’re hoping to target the student accommodation market with your rental property, Estate for years is more than ideal.

 

By applying this type of lease to your property, when one tenant moves out you can already have another tenant waiting to move in.

 

Estate from Period to Period:

 

Legally known as a ‘periodic tenancy’, this type of tenancy refrains from giving an end date to the tenancy agreement. The only requirement is that specified periods of tenancy and rental payment take place, for example the tenant must pay you rent by the 25th of every month.

 

If you choose to adopt this type of tenancy agreement to your property, there is only one condition – a notice to vacate must be given to your tenants. And the reason? There is no defined termination date.

 

Depending on what area of the rental market you are aiming for, it is quite probable that you will use this type of lease for the majority of your tenancies. Its flexibility means if you find a tenant who is in the rental market for the long run, you can profit from a continued tenancy relationship and save yourself the time of finding a new tenant.

 

Estate at Will:

 

Of all the leases, this is the most unstable with no specified ending date or a defined tenancy for the monthly payments.

 

We recommend you avoid this one. It lacks control on your monthly rental payments and runs the risk of you being left with the debt.

 

Estate at Sufferance:

 

Is a leasehold estate that arises when a tenant overstays their lease agreement and refuses to leave.

 

This is probably the worse of all the agreements, and revokes your claim on the property. Unless you are able to establish a new agreement with the tenant, the situation could get very complicated and may even end up in court.

 

 

With all these leases, it is important to remember that according to the Statute of Frauds, leases over one year should be declared in writing to make them enforceable.

 

So if you create such an agreement it should spell out the rights and obligations of both you the owner/landlord and the tenant… including maintenance, repairs and utilities. It may sound silly but these features will add to the security of your agreement. Allowing you to always remain in control.

 

 

Keep yourself aware of the legalities. If you do choose to hire a property manager they can deal with all the tenancy agreement, from start to finish. But by acquiring an understanding of the rental market and your lease requirements, you can keep yourself in the know and always be one step ahead.